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Minimizing The Impact Of The New 0.5%-Of-AGI Floor On Charitable Contributions And 2/37ths Reduction Of Itemized Deductions

September 30, 2026 07:01 am 0 Comments CATEGORY: Taxes

For many years, the U.S. tax code has incentivized individuals to give to charitable causes by allowing an itemized deduction for charitable contributions. Although the amount that an individual could deduct was limited to a certain percentage of their Adjusted Gross Income (AGI) based on the type of property contributed and the type of organization it was contributed to, any contribution made within those limits could be deducted dollar-for-dollar to reduce the taxpayer's taxable income.

However, under the One Big Beautiful Bill Act (OBBBA), passed in 2025, two new rules are set to come into effect for the 2026 tax year that will reduce the tax benefits that individuals receive from making charitable contributions. The first is a new 'floor' on charitable deductions that reduces a taxpayer's charitable deduction by 0.5% of their AGI (and if total contributions don't exceed 0.5% of AGI, the deduction is reduced to zero). And the second is a reduction of taxpayers' cumulative itemized deductions by a factor of 2/37ths, which takes effect only for taxpayers whose taxable income (before itemized deductions) exceeds the threshold for the top 37% Federal tax bracket.

The overall effect of the new limitations will be to slightly reduce the tax benefits of giving to charity – but only slightly, given how small the 0.5%-of-AGI floor and 2/37ths reductions are relative to the taxpayer's total income. However, the limitations will have a more noticeable effect on the ability to deduct charitable contributions for higher-income households, where the 0.5%-of-AGI floor creates a higher hurdle for deducting contributions – to the extent that for donations of smaller sizes, higher-income taxpayers might receive less of a hard-dollar tax benefit than lower-income taxpayers, despite being in a higher bracket! However, the tax benefits of charitable contributions steadily increase in favor of higher-income households for donations of bigger sizes. Which ultimately means that, rather than disincentivizing charitable contributions for higher-income households, OBBBA's new limitations actually incentivize taxpayers to contribute more as income level increases.

Although the relative impact of the new charitable contribution limitations isn't large enough to meaningfully change many individuals' giving plans, there are steps that can be taken to minimize their effect. One is to 'bunch' together several years' worth of charitable contributions into a single year to avoid being subjected to the 0.5%-of-AGI floor over multiple years, which can be aided by using a donor-advised fund (DAF) which decouples the timing of the taxpayer's contribution (and corresponding deduction) from that of the ultimate grant disbursement to another charity. Taxpayers who don't itemize their deductions every year can take advantage of a new charitable deduction for non-itemizers of up to $2,000 that was also created under OBBBA, and which isn't subject to the 0.5%-of-AGI floor or the 2/37ths reduction for itemized deductions. And IRA owners over age 70 1/2 can consider making Qualified Charitable Distributions (QCDs) instead of deductible charitable contributions, which for individuals taking RMDs can reduce the amount of RMD income the owner is required to recognize, and at the very least can reduce the amount of future RMDs the owner needs to take.

Ultimately, while charitable giving is often done with selfless intention, tax implications commonly play a role from a financial planning standpoint as well. And so while OBBBA's new rules may not require a complete overhaul of most individuals' charitable strategies, advisors who engage in careful planning can help their charitably inclined clients get the most out of their giving!

And if you want to go deeper on this topic, hear directly from the author on the Financial Advisor Technician podcast.

Systematizing Your Differentiated Service As A (True) Retirement Expert While Scaling To $850M Of AUM: #FASuccess Ep 509 With Dana Anspach

September 29, 2026 07:06 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 509th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Dana Anspach. Dana is the founder of Sensible Money, an RIA based in Scottsdale, Arizona, that oversees $850 million in assets under management for 330 client households.

What's unique about Dana, though, is how she has stood out as a retirement planning expert by leaning into decumulation planning and running multiple tests on client plans to give them greater confidence that they will meet their retirement goals.

In this episode, we talk in-depth about how Dana holds a first meeting with new clients that includes a rough analysis of whether they appear to be on track to meet their retirement goals (where she leverages Monte Carlo analysis but is willing to accept a probability of success well below 100%), how Dana further tests client plans by calculating a fundedness ratio (comparing the present value of cash flows a client needs to the current value of their assets) that she likes to see be at least 110% or higher, and how Dana also leverages historical data to stress test client portfolios across a range of return sequences that actually occurred.

We also talk about how Dana takes an asset-liability matching approach to portfolio management that seeks to generate sufficient cash flow to meet clients’ lifestyle spending needs over the following five to eight years (further boosting their confidence that they could endure a market downturn), how Dana measures whether clients are ahead of a ‘critical path’ to identify opportunities to sell equities following periods of strong returns and extend their income ladder, and how Dana’s firm serves as the ‘architect’ for designing these client portfolios but works alongside a partner firm to execute them.

And be certain to listen to the end, where Dana shares why she uses her own in-house retirement planning software rather than commercially available products, why Dana decided to stop offering standalone financial plans (even though they had previously been a good business line for her firm), and how Dana has navigated the challenges that come with leading a growing firm (including the need to be judicious with language to avoid setting unintended expectations for team members).

So, whether you’re interested in learning about what it takes to attract and retain clients through a retirement planning specialty, implementing an investment approach that boosts client confidence in their ability to meet their goals (and in their advisor), or key decision points that arise as a firm scales over time, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Dana Anspach.

What Really Drives Client Referrals

September 28, 2026 07:02 am 0 Comments CATEGORY: Marketing

Client referrals have long been a cornerstone of organic new client growth because they tap into a resource every established advisor already has: an existing client base. But before getting into specific referral strategies, there is a prerequisite to receiving any referrals at all: clients need to feel that the advisor provides enough value to be worth recommending. After all, referrals require clients to spend their time and put their own reputation on the line with those in their network. Clients who aren't highly satisfied are less likely to think of recommending their advisor in the first place—let alone trust the advisor to take good care of someone they refer.

The emphasis on clients 'feeling' that the advisor provides value – as opposed to simply 'providing value' – is deliberate. What matters for referrals isn't just the work the advisor does, but whether clients recognize its value. That is, value must be both created and communicated. One example identified in our Kitces Research data is the use of client service calendars, which help practices demonstrate ongoing value and avoid 'shadow work' that advisors complete behind the scenes without clients' knowledge. Practices using client service calendars have a 1.1-percentage-point greater referral-driven client growth rate than practices not using them, and a 'failure rate' (i.e., gaining no new clients via referral over the last 12 months) of less than 0.5%, compared to 9%. This suggests that helping clients see the value being delivered can also make them more comfortable referring others.

Once advisors are running the kind of practice worth referring to, many will naturally start asking their clients for referrals. But doing so can feel awkward for both parties; clients may feel 'put on the spot' and question whether the advisor's motivation is genuine concern for their well-being or generating additional revenue. Interestingly, we find that asking for referrals doesn't actually correspond with getting more of them: practices that never ask have a referral-driven client growth rate of 5.4%, declining to 3.0% for practices that ask more than once per year. Which suggests that any referrals generated by asking in the moment may be offset by clients becoming less inclined to refer in the future!

What does seem to help is simply making clients aware that referrals are accepted and appreciated, thus keeping the idea top of mind without explicitly asking. Advisors can do this on their website, in standardized communications, or through regular conversations with clients.

It's also important that clients know who they should refer. Some argue that conveying an ideal client persona (ICP) creates too much of a burden by requiring clients to remember the advisor's target market and judge who fits it, ultimately reducing referrals. However, we find the opposite: knowing the ICP helps clients recognize when someone in their network is a good fit, making them more likely to refer: advisors who verbally articulate their ideal client persona for referrals have a referral-driven client growth rate of 5.0%, versus 4.3% for those who don't.

A final, often underappreciated step is simply thanking clients for referrals. Advisors who don't thank clients have a referral-driven new client growth rate of 4.2%, rising to 5.2% with a personal "thank you" correspondence and 6.5% when that correspondence is coupled with a gift.

While these strategies are all designed to help advisors increase their number of referrals, some important context is necessary for how advisors should think about referrals within their broader marketing strategy. Our research has consistently found that practices achieving standout organic growth get only 25%–35% of their new clients from referrals, compared to 60%+ for practices not achieving standout growth. Which means practices looking to accelerate growth – or overcome persistently low growth – are unlikely to get there by optimizing referrals alone. Doing so ultimately requires succeeding with other marketing strategies that demand more work and/or capital. So while referrals aren't the solution to organic growth challenges, they are an important piece of the broader marketing recipe – and these strategies can help advisors make the most of the referral potential already embedded in their client base.

Weekend Reading For Financial Planners (September 26–27)

September 25, 2026 02:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a survey indicates many financial planning clients are concerned about rising consumer costs, with healthcare expenses at the forefront. Which suggests financial advisors have the opportunity to offer value both by increasing their clients' confidence in their financial plan (e.g., by stress testing it for different inflationary environments) and by recommending adjustments that are supportive of their long-term goals (while avoiding potentially reactive, short-sighted moves that clients might consider in this environment).

Also in industry news this week:

More than half of advisor respondents to a recent survey who use AI tools in their practices indicated that they are saving at least four hours per week from doing so, with advisors at RIAs leading the way on adoption
RIA M&A activity is on track to see a downturn in the third quarter after experiencing a brisk pace during the first half of the year, possibly reflecting firm owners' desire to focus inwards on client service amidst economic volatility

From there, we have several articles on retirement planning:

How safe withdrawal rates change when a retiree is looking well beyond a 30-year time horizon
Why a particular individual's safe withdrawal rate can be harder to calculate than it might seem (and how advisors can provide significant value through ongoing plan monitoring)
Actions advisors can consider to reassure clients who are nervous that they might be retiring at a market peak

We also have a number of articles on insurance planning:

Analyzing the available options for individuals to maintain health insurance coverage after being laid off
Why a job loss in one's 50s or 60s can be particularly financially burdensome (including the challenge of finding affordable health insurance coverage) and how advisors can help clients prepare for this contingency
How financial advisors can use income planning to help clients qualify for premium tax credits when using an Affordable Care Act marketplace plan for their health coverage

We wrap up with three final articles, all about recent consumer trends:

How it has become increasingly difficult to determine the true cost and value of a particular good amidst the rise of "shrinkflation", "skimpflation", and the loss of brand identity
How consumers end up paying an indirect 'tax' when product marketplaces have manufacturers pay to receive top placement on their search results
While consumers might identify troublesome trends that have emerged in recent years, taking a broader outlook can reveal the "ordinary abundance" that is ubiquitous today but would have been limited to only the wealthiest individuals in the past

Enjoy the 'light' reading!

Applying Fiduciary Principles To Demonstrate Value And Build Client Trust During 401(k) Rollover Conversations

September 23, 2026 07:03 am 0 Comments CATEGORY: Regulation & Compliance

While a financial advisor might prefer to manage all of a client's investible assets, when clients participate in a workplace retirement plan such as a 401(k), the assets in the plan typically can't be moved to a new managed account while the client remains employed there. A key moment for an advisor, then, occurs when a client separates from service by retiring or leaving their former employer and becomes eligible to roll their workplace retirement plan into an IRA.

While there are many potential reasons to roll over the plan assets, there may also be good reasons to keep assets within the employer plan, which suggests that clients could benefit from a personalized analysis when deciding whether or not to roll over their employer plan assets. And while a financial advisor is well-positioned to perform such an analysis, the ability to generate additional fees if the client decides to roll over the assets into an advisor-managed IRA creates a significant conflict of interest.

Amidst a fractured landscape of fiduciary requirements when it comes to rollover planning (e.g., different standards for RIAs and broker-dealers), the CFP Board has released a guide to applying its fiduciary duty to rollovers. While the CFP Board's fiduciary standard applies to CFP professionals, it offers a step-by-step framework that could allow all advisors to demonstrate the value of their advice and build greater trust with their clients in the process.

Given the many potential conflicts of interest that could go unmentioned and unaddressed by those without a fiduciary duty towards their clients, CFP Board requires a Duty of Loyalty of its certificants. In the case of rollover recommendations, this means identifying and disclosing conflicts fully, obtaining informed client consent, and managing conflicts with the client's best interest.

CFP Board also offers a seven-step process for applying its Duty of Care, which allows an advisor to take a methodical approach to analyzing a client's unique situation and developing recommendations accordingly. For instance, an advisor will want to understand the full range of options available to a client separating from their employer, as well as the tradeoffs involved in different alternatives (which go beyond costs and fees to include investment options, tax planning opportunities, and other factors). Also, documenting in writing the advisor's recommendations (along with supporting reasoning) as well as the client's ultimate decision can help avoid misunderstandings and provide institutional memory for the firm.

Notably, this analysis can be useful for both a client whose first instinct might have been to roll their workplace retirement plan assets to an IRA managed by their advisor (as they might not be aware of the potential benefits of keeping assets in an employer plan), as well as those who might be skeptical of rolling additional assets into an account managed and billed on by their advisor (as they might not have considered the benefits of unified asset allocation and coordinated tax planning opportunities).

Ultimately, the key point is that while rollover conversations are common among financial advisors and their clients, the decision isn't necessarily simple. From a fiduciary perspective, it merits both a thorough analysis of the available options and their tradeoffs, and the identification and disclosure of conflicts of interest that might be present. By doing so, an advisor can foster a more trusting relationship with their client that will hopefully last well beyond the time of the rollover recommendation!

And if you want to go deeper on this topic, hear directly from the author on the Financial Advisor Technician podcast.

Leveraging Video The Right Way To Add $1M Of New Revenue In Less Than 12 Months: #FASuccess Ep 508 With Nate Hoskin

September 22, 2026 07:07 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 508th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Nate Hoskin. Nate is the co-founder of SageContent, a platform that supports financial advisors in creating video marketing content.

What's unique about Nate, though, is how his own experience using video content to generate explosive client growth in his previous advisory firm led him to want to support other advisors in creating video marketing content that actually provides a positive return on investment.

In this episode, we talk in-depth about how Nate decided to found his own advisory firm and started creating educational video content on personal finance topics, how Nate's videos initially generated 80,000 followers in short order (but not necessarily leading to new clients because his relatively younger followers weren't necessarily good matches for his firm's portfolio management focus and AUM-based fees), and how Nate changed his service and fee models (leaning into comprehensive financial planning and changing to subscription retainer fees) and soon attracted 172 clients generating close to $1 million of annual revenue.

We also talk about how Nate experienced serious stress amidst this explosive growth (leading him to raise his fees and trim down his client base), how Nate realized that his passion is in helping other advisors create video content (ultimately leading him to sell his advisory firm), and how Nate's current company offers both lighter-touch and full-service video production services that allow advisors to create effective video marketing content efficiently.

And be certain to listen to the end, where Nate shares how advisors sometimes get trapped in the middle when it comes to the length of their video content (publishing videos that are too long for platforms such as YouTube Shorts and Instagram Reels but are too short for consumers looking for a deeper level of content), how Nate views the difference between "performative marketing" (that focuses on taking action) and "performance marketing" (that focuses on the results of tactics used, and why Nate thinks that even if advisors decide to delegate parts of their video production that it's important for them to be engaged with the content as they remain the visible face speaking to potential clients.

So, whether you're interested in learning about developing effective video marketing content, converting viewers into prospective clients, or what to keep in mind when considering whether to outsource video production tasks, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Nate Hoskin.