Weekend Reading For Financial Planners (October 4–5)

Experienced Financial Planning Job Candidates Seeking Higher Salary Premium: Report

(New Planner Recruiting)

One of the major topics of conversation in advisory circles in recent years is the ability for firms to attract talent, whether they're looking to grow their headcount and/or prepare for the retirement of senior advisors and leaders. One of the potential ways firms can attract new employees is through attractive compensation packages; however, these firms (particularly smaller ones that don't hire often) might not be aware of the salary expectations candidates for their position might seek.

According to New Planner Recruiting's 2025 New Planner Recruiting Salary Report, salary expectations of applicants for financial planning positions increased across the board over the past year, with paraplanners (who averaged 0.98 years of experience) seeing the biggest boost (12%, compared to a compound annual growth rate of 3.85% since the report began in 2021) in expected salary to $73,808 (not including bonuses or other benefits), while associate planners (who had an average of 3.82 years of experience) increasing their salary expectations by 5% to $95,057, financial planners (with an average of 9.38 years of experience) seeking $114,891 (up 4%), and students at CFP Board-eligible programs seeking $60,926 (up 2% from last year). Which suggests that planning professionals are putting a premium on their experience when considering a move to another firm (also notable, career changers into the planning industry tended to seek higher salaries than students, suggesting that firms might balance their higher salary expectations with the professional experience and skills from other fields bring to the table).

In the end, advisory firms face a choice when hiring among students or career changers without previous experience (who tend to come with lower initial salary expectations and can be trained 'fresh' in how the particular firm operates) and those who have worked at another firm (who might demand a higher salary to move but come with experience in the areas the firm is seeking). In addition, given the importance of employee retention (when considering the time and hard-dollar investments that firms make in recruiting and training new employees), considering the full scope of the employee experience (not just in terms of compensation, but also offering development opportunities and defined career paths) could be a key element of building a loyal staff as well.

Advisors React To The Arrival Of Dual-Share Fund Classes

(David Bodamer | Wealth Management)

One unique feature that has contributed to asset manager Vanguard's success in recent decades is a system it patented in 2001 that allows its Exchange-Traded Funds (ETFs) to track their benchmarks closely and cheaply by launching them as a share class of existing mutual funds (rather than creating them as standalone products). Other asset managers were expected to use this structure as well after Vanguard's patent expired in 2023, though doing so required approval from the Securities and Exchange Commission (SEC).

This week, the SEC signaled that it would grant exemptive relief to Dimensional Fund Advisors' application to offer dual share class funds (and encouraged dozens of other asset managers who had filed for relief to update their applications to look like Dimensional's to speed their approval process) in a sign that new dual share class funds could be arriving soon. Perhaps the biggest benefit for advisors and certain clients would be the ability to take advantage of "exchange privilege", which allows investors to switch to the ETF version of a mutual fund they hold (giving them the tax efficiency benefits of ETFs, including avoiding capital gains distributions that are more common amongst mutual funds) without having to sell the mutual fund (allowing them to avoid realizing any embedded capital gains).

Nevertheless, despite this week's signal from the SEC, advisors and their clients might not see a flood of new dual share class funds entering the market immediately. In addition to the need for additional SEC approvals, fund issuers might be picky about which funds they choose for the dual share class status. For instance, while index mutual funds might be good candidates (an area Vanguard used under its patent), asset managers might be more selective when it comes to actively managed funds, as they might hesitate to have their holdings published daily under the ETF structure. Issuers of less-liquid mutual funds or funds with high holdings concentration also might want to preserve the ability to close to new investors and therefore avoid having an ETF class.

Altogether, this week's move from the SEC indicates continued momentum on the path towards additional dual share class funds (though the number and types of such funds might be limited, at least in the near term). Which could offer advisors the opportunity to review the portfolios of current and new clients for potential exchange opportunities that could result in hard-dollar tax savings each year!

Q3 Biggest Quarter Ever For RIA M&A: DeVoe

(Michael Fischer | ThinkAdvisor)

The number of RIA Merger and Acquisition (M&A) deals reached a record-high of 272 in 2024, according to RIA M&A consultancy DeVoe & Company, with many Private Equity (PE)-backed buyers scooping up smaller firms (accounting for 72% of all transactions) and acquirors benefiting from a cooling of interest rates.

While questions remained entering 2025 as to whether this brisk pace would continue (particularly as firms faced a volatile equity market during the first half of the year, which could have put deals on the backburner given the need to turn attention inward towards client service during this period), the first half of the year ended up seeing a record-number of deals, with 148 transactions (up 17% from the prior-year period).

This momentum continued into the third quarter, as DeVoe identified 94 deals (involving RIAs with at least $100 million in AUM) in the period, a 15% increase over the previous quarterly record set in the fourth quarter of last year. In addition to greater deal volume, the size of deals increased as well, with mid-sized and large firm accounting for more than half of all deals (pushing average seller AUM close to the record high set in 2021). Reflecting an ongoing trend in recent years, PE-backed consolidators represented the majority of activity in the quarter.

In sum, RIA M&A activity appears on pace to set a full-year record, suggesting that underlying drivers – from the challenges of succession planning and internal deal-making (especially at larger firms) to the strength of the independent advisory model with its recurring revenues (that allow deals to continue to be done at these multiples) – remain quite healthy. Though it's notable that when the economics of advisory firms remain strong, internal succession does appear to remain a viable option in the current environment as well for founders who would prefer their firms remain independent after they retire, especially as next-gen advisors now have an increasing range of available financing options to allow them to pursue firm ownership without necessarily putting significant strain on their personal financial situation (but they still have to have the risk tolerance to take on a multi-million-dollar debt to pursue the opportunity!).

The 60/40 Portfolio: A 150-Year Markets Stress Test

(Emelia Fredlick | Morningstar)

While there are practically infinite possibilities when it comes to building a diversified investment portfolio, one common starting point for many investors is a "60/40 portfolio", consisting of 60% stocks and 40% bonds. The premise behind this portfolio is that the stock portion will help the portfolio grow during periods of strong equity market performance, while the bond portion will provide a steadier (if potentially lower) return and serve as a ballast during stock market downturns.

A look back at stock and bond performance over the past 150 years demonstrates that this premise exists in reality, with the 60/40 portfolio experiencing shallower declines than an all-stock counterpart through some of the worst bear market periods (e.g., a 52.6% decline for a 60/40 portfolio during the Great Depression, compared to 79% for the stock market, and a 24.7% decline during the "Lost Decade" of the 2000s for the 60/40, lower than the 54% drop for the stock market).

In addition to limiting the depth of a drawdown, the 60/40 portfolio has shown an ability to limit the length of a drawdown as well. For instance, using the "pain index" framework developed by former Morningstar director of research Paul Kaplan (which combines the depth and length of a market drawdown), the "Lost Decade" was more than seven times as painful for an all-stock portfolio compared to a 60/40 portfolio. In fact, there was only one period that saw more pain for the 60/40 portfolio than for the stock market: the 2020s downturn, from which the 60/40 portfolio only reached its previous high in June of this year (in this case, stocks were actually the helpful diversifier, given that bonds experienced a lengthier downturn).

Ultimately, the key point is that while the combination of strong recent stock market returns and the memory of the extended bond market downturn might be fresh in many clients' minds, a longer-term look-back indicates that while stocks provide stronger returns over time, bonds have effectively limited the depth and length of drawdowns during some of the most challenging market periods (presenting an opportunity for advisors to highlight the benefits of diversification, help clients determine how much "pain" they're willing to tolerate, and ultimately craft portfolios that meet their tolerance and capacity to take risk).

Diversification Means Always Having To Say You're Sorry

(Brian Portnoy | Forbes)

While it's relatively easy to understand the potential benefits of diversification when it comes to asset allocation (as nearly everyone has likely been admonished to 'not put all of your eggs in one basket'), holding a diversified portfolio can sometimes be a painful experience, whether because a particular asset class is doing well (and the client isn't taking 'full' advantage of it because they hold several other asset classes) or because another asset class (held in the client's portfolio) is performing relatively poorly (dragging down the overall portfolio's performance).

Portnoy identifies three potential behavioral explanations for this challenge. First, the concept of loss aversion suggests that individuals find losses more aggravating than they find gains enjoyable (perhaps at a 2-to-1 ratio). For instance, an individual might experience more 'pain' from a $100 loss in a particular asset than they get 'pleasure' from a $150 gain elsewhere in their portfolio. Next, under the "fallacy of composition", individuals assign the attributes of one piece to the whole. For instance, a sharp loss in an asset that only represents 1% of an individual's portfolio might not have a major impact on the value of the total portfolio, but the investor might attribute this risk to the overall portfolio. Finally, investors might suffer from the phenomenon of "if only", where they compare their portfolio results to a top-performing asset that they could have invested in (of course, they might have needed perfect hindsight!).

In the end, while the 'math' of diversification might make sense, the psychology of diversification can make such an investment approach hard to stick with over time. Which suggests (as many advisors will recognize), that the value they provide not only is in constructing diversified portfolios for clients, but also in helping clients stick with them over time (including through challenging periods where diversification might not appear to pay off)!

The Wealth-Limiting Risks Of Diversifying Too Soon – Redwoods, Bushes, And Pear Trees

(Nerd's Eye View)

While diversification is a staple of financial planning advice, the reality is that, when one look to those who achieve the greatest wealth or have the greatest impact, virtually none of them ever diversify… or at least, not throughout most of their years. After all, if Bill Gates had "just" diversified into the S&P 500 after Microsoft IPO'ed, he'd have a fraction of the wealth he does today. In fact, most of those on the list of the richest billionaires are people in their 60s, 70s, or 80s, who have held a concentrated interest in their businesses for nearly their entire lives. Like the redwood tree, they waited a very, very long time before branching out… and as a result, were able to grow the tallest.

Of course, that doesn't mean that diversification is always bad. Most "trees" are actually short bushes and shrubs, that grow just a few feet tall, but are still able to broaden their shoots and leaves enough to grow healthy. In the investing context, it's the equivalent of a person who diligently saves and invests in a portfolio for decades, and retires with "comfortable wealth".

Still, it's important to recognize that diversification isn't literally always the winning strategy, and for those who are young and have a long-time horizon, arguably not even a necessary one. In fact, the weakest tree is the Bradford Pear – known for growing a V-shaped trunk, effectively diversifying itself from the start… in a manner that virtually ensures the tree will eventually either collapse under its own weight, or succumb to external forces.

In sum, for those who have decided they have "enough", the satisficing strategy of the bush may be just fine. But for those who decidedly want to generate more wealth or have more impact, perhaps the redwood strategy is underrated after all? In fact, the highest-risk losing strategy may actually be the pear tree strategy of trying to have it both ways at once!

9 Ways To Unlock The Greatest Advisor Superpower

(Brendan Frazier | ThinkAdvisor)

Financial advisors come to the table with significant expertise in the technical aspects of financial planning. But what can set human advisors apart from other (often digital) sources of financial advice is their ability to dig deep and better understand their clients' unique preferences and needs. Which puts a priority on asking effective questions (though this can sometimes make advisors nervous as to whether they're asking the 'right' questions).

To start, preparing a handful of thoughtful open-ended questions can ensure the conversation keeps moving in case a closed-ended question leads to an abrupt response. Next, asking effective questions are not just about their content but also about their timing. For instance, asking questions that fit the "3E's" (i.e., Easy to answer, Exciting to share, and Emotionally engaging) can be a good way to build comfort and rapport with a prospect or client before digging into deeper, more personal topics. Also, while a client might provide an interesting response to an initial question, follow-up questions shows the client that the advisor is listening and interested in what they have to say. Advisors can further invite information through phrases such as "I'm curious about…" or "Tell me more about…" as well.

In addition to the substance and timing of questions, how an advisor asks a question can impact its effectiveness as well, whether in terms of tone, body language, and/or energy. Advisors can also encourage deeper answers from clients by pre-framing questions for context. For example, an advisor might explain why learning about a client's values is helpful in the planning process before diving straight into what could be seen as a sensitive question. Finally, effective questioning doesn't end with the question itself; rather being an active and engaged listener can allow an advisor to better understand the point their prospect or client is trying to get across and validate the client's experiences and perspectives in the process.

Ultimately, the key point is that the ability to ask questions and serve as an engaged listener can both allow advisors to better understand their clients' needs (and how they might respond to certain planning recommendations) and set them apart from more impersonal sources of advice (perhaps including AI tools that might be able to 'ask' questions but not be physically present to engage with a client).

How To Phrase Your Questions When You Need Honest Answers

(Jeremy Yip and Maurice Schweitzer | Harvard Business Review)

While most good-faith conversations involve both sides telling the truth, this doesn't necessarily mean that each individual will feel comfortable divulging all of the information they know. Which is particularly relevant in the financial planning context, where a prospect or client might not feel comfortable providing full details about their financial lives and background (which, if revealed, could be helpful in the planning process) to an advisor.

A first step to help draw out information is to do one's 'homework' to be prepared for the conversation (e.g., an advisor could look through data submitted by a new client to identify potential gaps that might need to be explored). Next, laying the foundation for honest communication by establishing a norm of trust (while recognizing there might be certain understandable boundaries) can make all parties feel more comfortable during the conversation. In addition, taking time to build rapport before digging into potentially sensitive areas can lead to a sense of greater familiarity and potentially openness to deeper topics.

The way questions are framed can also determine the depth of the response; one potential tactic is to frame a question in a way that presumes a problem. For instance, rather than asking "How do you feel about your ability to retire", an advisor might instead ask "Is there anything holding you back from retiring?" to unearth a potential 'pain point' that they could help resolve. Finally, individuals are often more truthful when meeting face-to-face, so holding in-person (or at least video) discussions could lead to more thorough responses than an email exchange or telephone call.

In sum, while a client might not intend to deceive their advisor, they might be hesitant to reveal all of their experiences and emotions surrounding money. Which suggests that taking time to first build trust and familiarity before digging into more challenging areas could pay off in the form of greater clarity for the advisor and, ultimately, a better financial plan for their client.

Good Question. Wrong Time.

(Meghaan Lurtz | Less Lonely Money)

A common question used by financial advisors to help clients uncover the emotions and scripts they have around their money is to ask the client to relay their earliest money memory. However, many new clients might be reluctant to answer this question (or go into the level of depth the advisor might be seeking) until they've built up a relationship of mutual trust.

With this in mind, advisors might consider starting out with alternative questions that can build connection and generate insights without being so overwhelming for the client. In particular, questions that hit on the client's sense of agency (e.g., times when they made a choice, took ownership, or had pride in their actions) could be easier to share and help the client feel more empowered (before potentially broaching questions that could make them feel more vulnerable).

Questions that could evoke a sense of agency in clients could include "Tell me about your first job" (which can elicit a story that includes pride, some humor, and perhaps even a lesson), "When did money start to feel like it was yours to manage" (which can help an advisor locate a turning point in the client's life), "When did you first feel confident – or unsure- about a money decision?" (which opens the door to self-trust, risk, memory, and meaning), and "What's the first money decision you remember making on your own?" (which puts the spotlight squarely on autonomy), among others. These questions allow the client to reflect in a gentle way with an advisor who they've only recently got to know.

Altogether, while questions can play a powerful role in helping an advisor better understand a (new) client, choosing the 'right' questions at the 'right' time is a key skill to elicit valuable information -- without adding stress (on top of working with an advisor, which can already be a leap for many) for the client.

What If AI Doesn't Get Much Better Than This?

(Cal Newport | The New Yorker)

A oft-referenced concept in the business world is "hockey-stick growth", where a business' revenues (or other metrics) stay relatively flat for a period before rapidly and exponentially rising, perhaps after positive developments in its product-market fit or a viral marketing campaign. This concept has also been applied to the world of AI, including in so-called "scaling laws" which suggest that AI systems could become exponentially more powerful and capable over time as they are given more computing power and trained with more data.

Such "scaling laws" led to predictions in the early 2020s (particularly amongst executives at AI firms) that major AI platforms (e.g., ChatGPT) could potentially become unimaginably powerful in a short time. However, such predictions haven't played out; for example, OpenAI's GPT-5, released this summer, showed improvements on its predecessors in some areas, but did not demonstrate the major leaps that were seen when previous models were released (despite a larger time gap for its release compared to previous iterations). Instead, at least for the current crop of Large Language Models (LLMs, such as ChatGPT), unlimited, "hockey-stick" growth in capabilities appears evasive, with several AI companies instead turning to refine their models to more effectively turn the power they have today into more practical applications.

Ultimately, the key point is that while future approaches to AI could lead to some of the more extreme predictions that have been made (e.g., AI wiping out a significant percentage of white-collar jobs) coming true, the current generation of LLMs appear to not be experiencing exponential returns to the data and computing power going into them. Which perhaps is a positive outcome for many workers who can take advantage of these tools' (often impressive) capabilities today without experiencing some of the severe outcomes that could come with more powerful systems?

A Simple Heuristic For When (Not) To Use AI

(Cedric Chin | Commoncog)

AI tools have demonstrated significant skill in a variety of areas, from organizing data to taking notes during meetings. A key question, though, is how to determine the tasks where humans are superior and an AI tool might not be the best option.

Based on the work of business professor Vaughn Tan, Chin offers a rule to answer this question: "Do not outsource your subjective value judgments to an AI, unless you have a good reason to, in which case make sure the reason is explicitly stated." Chin argues that humans remain much better than AI tools at making meaning, or, as Tan puts it, "any decision we make about the subjective value of a thing" (e.g., whether something is good or bad, whether a task is worth doing or not, or, when deciding whether one thing is better than another, how much they can be compared on the same scale).

For instance, an AI tool might be able to automatically schedule meetings, but the user will likely be much more adept at determining which meetings are most important when considering potential conflicts. Or in the context of investing, an AI tool might be good at analyzing the performance of two stocks but a human will be better at determining which stock is a better fit for their (or their client's) portfolio given their familiarity with their unique risk tolerance and goals.

In the end, while AI tools offer increasingly powerful capabilities, humans still have the upper hand when it comes to making subjective judgments (particularly based on their own preferences!). Which, for financial advisors, suggests a potential 'sweet spot' of leveraging AI tools for tasks such as data analysis and pattern recognition while using their own judgment when it comes to crafting planning recommendations based on the unique characteristics of each of their clients.

AI Isn't Replacing Radiologists

(Deena Mousa | Understanding AI)

One of the most prominent discussions surrounding advancements in Artificial Intelligence (AI) technology is the potential for AI tools to replace human workers in certain jobs. One of the jobs most often cited as having the potential to be replaced by AI is that of radiologist, given that it involves digital inputs, pattern recognition tasks, and clear benchmarks (which are among the strengths of AI tools).

Despite this seeming vulnerability (and a number of AI-powered radiology tools that have emerged), human radiologists appear to be doing better than ever. For instance, radiologists as of this year were the second-highest-paid medical specialists (with an average income of $520,000); in addition, American diagnostic radiology residency programs offered a record 1,208 positions across all radiology specialties (up 4% from 2024).

The gap between the seeming vulnerability of radiologists and their continued success can potentially be explained by a few factors. First, while AI tools can best humans on standardized tests designed to measure AI performance, they perform worse in actual hospital conditions (where they might be presented with a case that didn't appear in their training data). Second, regulators and medical insurers have been reluctant to approve or cover fully autonomous radiology models (suggesting a continued 'trust penalty' for the technology). Finally, models are (so far) only able to replace a small share of a radiologist's job; beyond diagnostics (a potential strength of AI tools) radiologists also spend a significant amount of time on other tasks, such as speaking with patients and fellow doctors.

Notably, the case of (still successful) radiologists is not dissimilar from that of financial planners when it comes to disruption from AI. While AI tools can perform a range of functions related to an advisor's work (e.g., creating an asset allocation appropriate for a client with given characteristics or gleaning details from a client's tax return), much of an advisor's job is interfacing with clients, better understanding their unique situations, and ultimately creating a relationship of trust, which could be challenging for AI tools to replicate!

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We hope you enjoyed the reading! Please leave a comment below to share your thoughts, or send an email to [email protected] to suggest any articles you think would be a good fit for a future column!

In the meantime, if you're interested in more news and information regarding advisor technology, we'd highly recommend checking out Craig Iskowitz's "WealthTech Today" blog.