Weekend Reading For Financial Planners (May 10–11)

Survey Finds Little Fee Compression, But Advisors Anticipate Slight Easing In Future

(Michael Fischer | ThinkAdvisor)

For many years, financial advisory industry observers have fretted about the possibility of "fee compression", for example, due to the introduction of robo-advisors that could charge clients a lower fee for portfolio management services (ostensibly forcing human advisors to lower their own fees to remain competitive). Nevertheless, the advice industry has yet to experience any real fee compression whatsoever (or significant margin compression for that matter). human advisors to lower their own fees to remain competitive). Nevertheless, the advice industry has yet to experience any real fee compression whatsoever (or significant margin compression for that matter).

And now, according to a survey of 2,000 financial advisors (across the full range of advisor channels) by research and consulting firm Cerulli Associates, the average fee charged by advisors still continues to remain largely stable (and notably, the number of advisors charging clients fees in lieu of commissions has increased, with 44% of those surveyed now deriving at least 90% of their revenue from advisory fees, a number that is expected to grow to 54% by 2026).

Nonetheless, the specter of fee compression remains present among advisors surveyed, particularly for high-net-worth clients. The survey found that, by 2026, the average fee for clients with $750,000 in investible assets is expected to be 106 basis points (bps) or 1.06%, 92 bps (0.92%) for those with $1.5 million in assets, and 66 bps (0.66%) for clients with more than $10 million in assets, down approximately 1 basis point (0.01%) compared to 2024 levels. Notably, Cerulli found a direct correlation between the range of services an advisory team offers and their clients' average AUM, suggesting that expanding the number and aligning them to the types of services that wealthier clients need could help firms that want to move 'upmarket' (and perhaps defend their fees at higher asset levels).

These fee levels are largely in line with results from the 2024 Kitces Research Study on Advisor Productivity, which found that the typical fee schedule for firms charging on a graduated basis (i.e., with multiple tiers with different rates, where client fees are calculated as a blended rate, where each tier's rate applies incrementally to the portion of the client's portfolio that falls within that tier) remains at 100 bps (1.00%) for client assets up to $1 million, then declines to 90 bps (0.90%) at $2 million, 75 bps (0.75%) at $5 million, and 60 bps (0.60%) at $10 million in assets, though the blended fees fall more gradually (staying at 100 bps until $2 million, 85 bps at $5 million, and reaching 75 bps at $10 million), in part because the graduated fee schedules continue to apply the higher rate on the initial dollars while adding new dollars at the next (lower-priced) tier, and in part because it appears that firms that more aggressively reduce their stated fee schedules above $1 million of assets are also more likely to use a fee greater than 1% on assets under $1 million.

Ultimately, the key point is that the long-feared fee compression in the financial advice industry has yet to come to fruition despite ongoing prognostications, and future expectations for reduced fee levels appear to be modest at best. However, as more competition enters the advice space (e.g., artificial intelligence-powered advice tools), advisory firms can potentially better retain and grow their client base by leaning into the areas of value that help them stand out from digital competitors and implement a curated offering of high-value service offerings for their ideal target clients (without being 'too' comprehensive, as the time needed to implement an extremely broad service menu can potentially cut into a firm's profitability!).

Younger Americans Focused On Affordability, Seeking Out Financial Advisors For Support: Survey

(Rethinking65)

While many consumers seek out a financial advisor as they approach retirement age (given the complicated analyses involved in determining whether an individual can 'afford' to retire and how much income they might be able to generate to support their lifestyle), there is no shortage of planning issues for those decades away from retirement as well. And at a time when the costs of housing and childcare have climbed, those in younger generations appear to be eager to access financial advice.

According to Northwestern Mutual's 2025 Planning And Progress Study, 46% of those in Gen Z and 31% of Millennials are concerned about their ability to afford to buy a house, exceeding the 23% of all adults surveyed who reported the same. Similarly, 29% of Gen Zers and 16% of Millennials surveyed expressed concern about their ability to afford to have children (compared to 11% of all adults). Overall, more than 80% of respondents in these two generations said their financial planning needs improvement and more than 25% of those in each group said they have gotten professional advice from an advisor for the first time within the last year. Among those who engaged an advisor, the most common reason cited across generations was to help them build and stick to a comprehensive financial plan focused on both growing and protecting their wealth. Notably, one area where Millennials stood out from the rest of the adult population (including Gen Z) was in engaging an advisor to better align their finances with their personal values and causes they care about the most (suggesting that certain priorities aren't necessarily about relative age but could be specific to a particular generation).

In sum, advisors could find eager prospective clients among individuals in younger generations, though this survey suggests they could come to the table with a different focus compared to clients near and in retirement. Which could ultimately offer an opportunity for firms who want to specialize in the planning priorities of younger Americans (while some advisors who currently work with older clients might continue to focus on that cohort, lest they stretch themselves thin offering the additional services most in demand by younger clients?).

"Advisor Moms" Largely Satisfied With Careers, With Equity Owners Happier

(Diana Britton | WealthManagement)

While financial advisors tend to demonstrate strong levels of overall wellbeing (according to Kitces Research on Advisor Wellbeing), the job can come with a range of stressors, whether in helping nervous clients navigate periods of market turbulence or in meeting growth or revenue targets. And adding on the responsibilities of parenthood can create particularly stressful periods for advisors as they navigate their work responsibilities alongside the challenges of raising children.

Looking specifically at advisors who are also moms, a survey conducted by The Ensemble Practice in conjunction with the Advisor Moms Group (a private Facebook group for "female financial advisors balancing advisory practices and being amazing moms"), finds that those in this group are largely satisfied with their careers, with 52% rating their satisfaction at a 9 or 10 (on a scale of 1-10) and another 41% scoring it a 7 or 8. A key indicator of happiness identified in the report was ownership, with 60% of those rating their career as a 9 or 10 having ownership in their firm, while 46% of those who gave it a 7 or 8, and only 11% of those with a rating below 7 were equity owners. Other factors contributing to happiness among respondents included work hours (with the happiest averaging 40 hours per week), working for smaller firms (with a median AUM of $230 million), being on a career track, and having a mentor. In terms of the employee retention implications for firms, 46% of respondents said they had considered leaving their firm in the past two years, though only 16% had either looked at postings or actually applied for other jobs (notably, there is also likely a population of advisors who left the industry after becoming moms [and therefore don't appear in this survey], possibly in part because they experienced insufficient support from their employers).

Altogether, these findings indicate that the surveyed advisors are largely thriving in their roles (perhaps in part by leveraging the skills [e.g., time management, attention to detail] they build by being a mom), though firms looking to retain those in this group can consider the factors (e.g., ownership, workplace flexibility, and career paths) that drive satisfaction among these advisors (that also might prove helpful to retaining 'advisor dads' as well?).

The Arithmetic Of Roth Conversions

(Edward McQuarrie and James DiLellio | Journal of Financial Planning)

Roth conversions are a popular way for financial advisors to offer value for their clients, as converting (a portion of) a client's IRA to a Roth IRA can allow for years of additional growth and tax-free qualified withdrawals, at a cost of likely owing taxes upfront on the amount converted. However, because the value of Roth conversions can vary significantly depending on a client's circumstances (as well as factors outside of their control, such as future changes to tax rates), running the numbers can help determine how much a client might consider converting in a given year.

With this in mind, the authors use mathematical calculations to identify the types of clients who would be best suited to Roth conversions. In terms of timing, they find that it's typically better to conduct Roth conversions earlier rather than later in a client's life to benefit from additional years of tax-free growth for the converted funds. Relatedly, clients who plan to leave assets to heirs could be good candidates for (partial) Roth conversions as well, as their inheritors will have up to 10 years of additional tax-free compounding available (increasing the likelihood that the conversion will 'pay off'). Also, clients who are able to cover the taxes due on the conversion using funds outside of their traditional IRA (preferably cash or assets with a very high-cost basis, so as not to incur additional taxes when raising the funds) will tend to see better payoffs than those who use funds inside their IRA to pay the taxes due on the conversion.

Looking at tax rates, the best opportunities for conversions are often to 'fill up' tax brackets just below major gaps (e.g., currently the 12% and 24% brackets), respectively (while, for those in the 24% bracket, being aware of potentially triggering IRMAA surcharges), while perhaps being more cautious when clients whose income puts them just into brackets above the major gaps. For instance, a client who 'fills up' the 12% bracket through a Roth conversion is less likely to have had distributions from their traditional IRA eventually taxed at a rate significantly below 12% (minimizing the potential for future regret), while a client whose income just puts them into the 22% bracket could find future withdrawals falling into the 12% bracket (reducing the value of the Roth conversion).

In the end, while (partial) Roth conversions are valuable for many types of clients, identifying the ideal client situations (and the optimal amount to convert) can increase the chances that the conversion will end up paying off for the client, helping them overcome potential hesitance to pay taxes on the conversion today and ultimately seeing a hard-dollar payoff from working with their advisor in the form of a lower lifetime tax bill!

7 Reasons Advisors Should Not Do A Client's Roth Conversion

(Retirement Tax Services)

Roth conversions are often seen by financial advisors as a prime opportunity to reduce a client's lifetime tax bill. However, there are cases where doing so might not be appropriate, whether because the 'math' doesn't check out or because the client (or their CPA) isn't bought into the idea of paying more in taxes today to (hopefully) create a lower tax burden down the line.

To start, if a client is expecting to be in a lower tax bracket in retirement than they are today, engaging in a (partial) Roth conversion in the current year might not be optimal (however, if the client plans on making a large purchase in retirement [e.g., a vacation home] funded by their IRA assets, engaging in smaller partial Roth conversions could still be valuable to avoid a large, one-time distribution that could put them into a higher tax bracket). Also, if a client plans to leave their remaining traditional IRA assets to charity at death (and perhaps plans to cover much or all of their required minimum distribution obligations with qualified charitable distributions), Roth conversions might prove to be less valuable (since assets that are donated won't be subject to income tax). Further, if a conversion will significantly increase their adjusted gross income (which could cause problems with the taxable portion of their Social Security income, Medicare premiums, or various tax credits tied to income), it could reduce the value of the conversion as well.

Notably, the reasons to potentially reconsider a (partial) Roth conversion for a client go beyond the numbers. For instance, some clients might have a strong preference to delay paying taxes as long as possible and could react negatively to their advisor's insistence that a Roth conversion would be expected to lower their lifetime tax bill (even though it means paying more taxes in the current year). Also, given that the logic and math behind Roth conversions aren't necessarily straightforward, ensuring a client understands their advisor's explanation of their recommendation to do so can ensure the client is on board with the strategy (and perhaps will be more likely to trust the advisor's future recommendations as well). Beyond the client themselves, getting their tax preparer onboard with the Roth conversion plan (by reviewing the client's tax return and proactively approaching the CPA about the plan) can help avoid surprises for both the CPA and the client when their taxes are prepared and the client owes more in taxes than was expected.

Ultimately, the key point is that determining whether to recommend Roth conversions to a client is both an 'art' (in communicating the potential benefits and consequences of doing so to the client) and a 'science' (in determining whether and, if so, how much to convert in a given year). Which presents an opportunity for advisors to add value for clients on an ongoing basis, as the appropriateness (and optimal dollar amount) of (partial) Roth conversions will vary from year to year!

Timing Strategies For Roth Conversions: Conversion Cost Averaging Vs "Barbelling"

(Nerd's Eye View)

Roth conversions can be used to help lower their lifetime tax bill by paying taxes on the converted amount upfront (hopefully at a lower tax rate than they would down the line). And because Roth conversions can be made throughout the year in any amount, there are different strategies that can be used to maximize the value of the conversions, minimize potential client regret, and avoid running afoul of the tax rules that govern conversions when trying to fill 'only' a particular tax bracket.

For instance, with "conversion-cost averaging", an advisor can work with their client to determine a provisional Roth conversion amount for the year (based on the client's expected income and tax rate) and then divide that amount into monthly (or perhaps quarterly or semi-annual) conversion amounts. In this way, if the market appreciates over the course of the year, at least a portion of the appreciation will be earned within the Roth IRA (thanks to the initial tranche of the conversion cost averaging strategy), while if the market declines, the client will be making at least a portion of the year's conversion total at lower valuations as the market slips further (helping to ameliorate some of the potential regrets of converting too much up front).

An alternative strategy is to take a "barbell" approach, engaging in one conversion as early in the year as possible and a second conversion much later in the year when the client's tax pictures is clearer (e.g., so the client doesn't convert so much earlier in the year that it unintentionally puts them in a significantly higher tax bracket). With this approach, the initial converted amount gets the benefit of tax-free growth (if the market rises), while the second conversion can be adjusted based on the client's actual taxable income for the year (and lets the client take advantage of the 'sale' on Roth conversions if the market declines during the year).

In sum, advisors can add value for clients not only by determining the appropriate amount of a (partial) Roth conversion in a given year but also by timing the conversions in a way to maximize the potential financial gain and minimize the client's potential regret (e.g., if the market were to decline after a large conversion or jump in advance of one)!

6 Key Criteria For A Good Marketing Strategy

(Bryce Sanders | Financial Advisor)

When it comes to financial advisor marketing tactics, the 'best' option(s) for a given firm is likely to depend on their budget (both in terms of time and hard dollars) as well as their ideal client persona. With that in mind, running potential tactics through several filters can help determine which ones might best bring in the right-fit clients in an efficient manner.

To start, an effective marketing plan tends to be proactive. For instance, while client referrals is the most commonly used marketing tactic among advisors (according to Kitces Research on Advisor Marketing), firms that actively cultivate referrals (e.g., by identifying the "active promoters" among its client base and inviting  them to a "Dedicated Introduction Meeting" where the advisor and client identify contacts who might benefit from the advisor's services) could find more success than those who wait for clients to refer on their own volition. Next, a firm can consider whether a certain tactic will deliver the 'message' it wants to send in order to attract prospects who match its ideal client persona to avoid spending time meeting with clients who aren't a fit for the firm's service offering and fees. Also, identifying marketing tactics that are repeatable and cost-efficient can lead to more durable strategies that a firm can tap into over the course of several years (avoiding a search for a new tactic every time it wants to make a push or growth. Finally, tactics that are measurable can allow an advisor to determine whether it achieved sufficient Return On Investment (ROI) to avoid continuing throwing money after ineffective strategies.

In the end, while different firms have found success with a wide range of marketing tactics, evaluating potential options based on key criteria can increase the chances it will be successful and help a firm generate client growth for years to come!

Marketing Tips For Advisors Starting Their Own Firm

(Danielle Walker | Advisor Perspectives)

When advisors start their own firm, they often have a lot of time on their hands (as they might not have many clients to serve yet) but have limited revenue to put towards marketing. Which means that they might initially favor marketing initiatives that are more time-intensive and less expensive in terms of hard dollars.

According to firm founder Cady North, one way new firm owners can hone their 'pitch' is by holding in-person, one-on-one chats with as many people as possible. Even if the person the advisor is meeting with might not be a good fit for their firm, in-person meetings can help spread the word about the new firm (as the interlocutor might have a friend who could be a good fit) and help the advisor figure out which messages resonate with their target audience. Next, as the advisor starts to onboard clients, taking time to reflect on the types of clients they enjoy working with the most and their characteristics (including both demographics [e.g., age or level of wealth] and psychographics [e.g., values and lifestyle]). Doing so can help the advisor target their marketing efforts (e.g., content creation) towards an audience who would make best-fit clients. Finally, while having an online presence can be valuable for a new firm, investing in professional Search Engine Optimization (SEO) support might not offer strong ROI for a new firm. Instead, there are several steps a founder can take on their own to improve their search performance at no hard-dollar cost, including setting up their Google Business profile, posting links to articles where the firm has been featured, and creating a page where the advisor clearly describes their target client.

Ultimately, the key point is that an effective marketing strategy might look very different for a new firm owner compared to one operating an established business (who might have less time and more money to invest in marketing). But by investing time early on (whether through in-person networking, tailoring an effective website, and/or drilling down to an ideal client persona), advisors can get the ball rolling on attracting ideal-fit prospects and starting to grow their client base.

Using Metrics To Take The Guesswork Out Of Marketing And Drive Real Results

(Crystal Butler | Advisor Perspectives)

A financial advisor's day is filled with numbers, from analyzing clients' portfolio returns to running a cost/benefit analysis on a particular tax strategy. Notably, though, some of the most important numbers a firm owner might assess are their internal marketing metrics, as they can help identify areas to tweak to gain greater marketing efficiency.

To start, an advisor can track metrics related to their sales funnel (which might live within their CRM), such as sales cycle length (with a long sales cycle potentially indicating inefficiencies in the nurturing process), lead sources (to better understand which marketing tactics are producing the most eventual clients), referral sources (to see which clients are the biggest champions for the firm), qualification status (to prioritize the leads who are the best fits for the firm), and sales prospect stages (to see if prospects are getting hung up at a certain part of the sales pipeline).

Other key marketing areas to track include the firm's website data (e.g., analyzing traffic sources, search queries, visitor behavior, and conversions to see what brings visitors to the website and how often they take meaningful action after visiting), social media metrics (e.g., total followers, connections and engagement, and click-throughs or external links to see if time spent engaging on social media is leading to increased attention and leads for the firm), email marketing metrics (e.g., open rates, click-through rates, conversion rates, and list growth rate), and referral tracking (e.g., referral sources, referral success rates, and top referral partners [e.g., centers of influence such as attorneys or accountants]).

Altogether, while this might seem like a long list of metrics to track, starting out with certain key areas (e.g., website performance, email engagement, and referral tracking) can provide valuable insights without being overwhelmed by data. Which could ultimately be a valuable investment of time by allowing the advisor to identify which areas they might want to double down on in their marketing and which tactics or processes have been less productive.

20 Tips For Those Who Don't Like Giving Feedback

(Julia Martins | Asana)

Providing regular feedback is an important part of building a healthy and effective workplace, whether it's feedback from a manager to a team member, feedback between peers, 'upward' feedback from an employee to firm leadership, or feedback from clients. Nevertheless, giving feedback can sometimes feel awkward, whether because an individual might not know how the recipient will react to the feedback or the best time to provide it. With this in mind, Martins offers a series of best practices for giving feedback in a variety of situations.

Whatever the relationship between the giver and the recipient of the feedback, doing it privately (to avoid making the constructive feedback look like a public castigation), being timely (perhaps 24 hours after the event or project to remain timely without seeming critical in the moment), focusing on one or two things (as mentioning many items could make the recipient particularly defensive), being specific and providing examples (to help the recipient improve their performance), and giving the recipient space to react (offering a potential opportunity to brainstorm solutions) can all increase the chances that the feedback will be well received.

Feedback often occurs in the manager-employee dynamic. For managers, feedback to team members can be more effective when the manager is prepared in advance (perhaps preparing bullet points with specific examples to share), when it's offered both verbally and in writing (to ensure the intended tone comes across and to create a permanent record of the feedback), and when the manager offers to think through potential solutions with the recipient (to give the employee concrete ways they can improve their performance). This dynamic is sometimes flipped, with an employee providing a manager with upward feedback. In these cases, feedback often lands better when the provider differentiates between intent and impact (perhaps explaining how a certain action inhibited their work even if the manager had good intentions) and when the employee can offer solutions (to focus on the future rather than dwelling on the past event).

In sum, while feedback is a valuable tool, providing it can sometimes involve a delicate balance of ensuring that the intended message gets across without making the recipient too defensive. Nonetheless, when feedback is given in a timely, respectful, and forward-looking manner, the experience can prove valuable for both the giver and the recipient!

How To Recognize Hidden Feedback

(Jeff Wetzler | Harvard Business Review)

Feedback is often best provided in a direct manner, whether during a formal evaluation or an ad hoc pull-aside. That said, sometimes individuals provide 'indirect' feedback (whether they intend to or not), which can be frustrating for recipients, as they might have a hard time understanding the message that is being sent.

Signs that someone is providing this 'hidden' feedback include repeated questions or suggestions about seemingly small details (which could mask broader concerns about the recipient's capability, readiness, or performance), increased involvement in tactical decisions (which could indicate eroding confidence), or unexpected decreases in engagement (which could suggest that the work has been deprioritized). While it would likely be preferable to get this feedback directly (instead of having to read the proverbial tea leaves), those who suspect they are receiving indirect feedback can take matters into their own hands. For instance, the next time they talk, the recipient might ask a suspected 'hidden' feedback provider "What blind spots should I be aware of that I might not be seeing?", which could draw out the 'real' feedback (that the interlocutor has been hesitant to give or might have thought they had already communicated). Another approach is to frame the question as seeking 'advice', for example by asking "How might you approach this challenge differently than I am?". Whichever tactic is chosen, listening intently for explicit (and, perhaps, further implicit) clues can give an idea of what is actually at the heart of the feedback (and if the feedback provider provide a direct response, thanking them for their candor can encourage them to be more open in the future).

Ultimately, the key point is that while 'hidden' feedback can feel like a passive-aggressive practice, uncovering the underlying concern behind it could still provide valuable information to help an individual have a clear understanding of how others see their performance (and perhaps open the door to more explicit feedback in the future!).

Managing Feedback Like An Olympic Athlete

(Michael Gervais | Harvard Business Review)

Office-based professionals might be used to getting feedback during a quarterly or annual performance review, and perhaps during occasional check-ins with peers and their managers in between. However, feedback can look much different for high-level athletes, who not only receive regular feedback from coaches and performance staff (as well as from an increasing number of technical tools) but also are subject to the opinions of fans and other outside observers as well.

When it feels like the amount of feedback one receives is overwhelming, a first step is to focus on messages from a trusted circle of advisors. In the professional context, this could mean prioritizing feedback from trusted peers and managers over comments from 'outsiders'. Next, it can help to separate feedback (which is designed to benefit and guide the recipient) from opinions (which are shared to convey personal thoughts or feelings and are often unsolicited) when considering what to think through and what to ignore. Also, because receiving feedback can be an emotional experience (as it can sometimes feel like commentary on one's self-worth), taking a moment to pause and reflect on the content of the feedback can help separate the initial emotional reaction from the potentially valuable insights being provided. Finally, with feedback filtered down to the most useful information being provided by trusted sources, developing a systematic approach to incorporating this feedback (e.g., by keeping a record of efforts and improvements) can ensure that it is applied and not just acknowledged.

In the end, while a financial advisor might not face the same pressures as an Olympic athlete, receiving and implementing feedback can be a challenging process. Nevertheless, creating a structure to focus on the most valuable feedback and committing to implement it can ease the psychological pressure of processing it and, ultimately, lead to better performance.

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