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Weekend Reading for Financial Planners (Nov 9-10)

November 8, 2019 02:53 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big industry news that the SEC is looking at finally updating the advertising rules for RIAs after nearly 60 years, which would include allowing advisory firms the ability to use testimonials and endorsements from clients, and even highlight third-party ratings about their work with clients (while still limiting how firms tout their investment performance in particular).

Also in the news this week was an announcement by Schwab at their IMPACT conference that the firm is looking to expand its banking and lending services for advisors on their platform, the rollout of Morningstar’s new Analyst Ratings for funds (that are resulting in a substantial number of downgrades for funds, especially in their higher-cost share classes), and an indication that the SEC is gearing up to crack down on hybrid broker-dealers using affiliated money market sweep programs without properly disclosing the conflict to their RIA clients.

We also have several retirement related articles this week, from the IRS’ announcement that it is gearing up to roll out new life expectancy tables that will reduce RMD obligations beginning in 2021 (though the actual RMD factors may only be reduced by about 0.21%), a look at the “9 types of retirees” and their psychographic tendencies, how some firms are experimenting with virtual reality to literally help clients better visualize their future retirement (to help them change their behavior to save more), how to help clients have a more financially successful retirement not just by helping them plan for retiree health care costs but actually getting healthier to reduce those costs, and an interesting look at how the discussion of income inequality is raising questions about the nature of retirement and why “the rich” don’t just retire once they have “enough” in the first place?

We wrap up with three interesting articles, all around the theme of how we work most productively and what it takes to incentivize us to do so: the first looks at a recent study that finds while we tend to believe financial incentives will motivate others, when we consider our own motivations we usually don’t think it will have as much impact (raising questions of whether we overestimate the role financial incentives really play); the second explores the recent decision of Microsoft in Japan to test out a 4-day workweek (which at least temporarily resulted in a whopping 40% increase in productivity after a 5-week experiment); and the last looks at a company that is trying out (just) 5-hour work days for their knowledge workers, on the theory that if employees can really get concentrated deep work done from 8AM to 1PM, they’ll accomplish as much as a full work day anyway… and be happier and better rested with all the time they have left over.

Enjoy the ‘light’ reading!

Weekend Reading for Financial Planners (Oct 5-6)

October 4, 2019 02:54 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a slew of news stories spurred by Interactive Brokers’ announcement that it was cutting its trading commissions on all US stocks and ETFs to zero, which in turn spawned announcements from Schwab doing the same just two business days later, TD Ameritrade price-matching Schwab at zero just hours after that, E-Trade cutting their trading commissions to zero the next day… and Fidelity notably deciding to hold firm (albeit at just $4.95/trade), and suggesting that it may be better to hold firm on pricing if it keeps Fidelity’s revenue up to be able to provide advisors better service as well!

From there, we have a few articles on hiring and leveraging associate advisor talent in your advisory firm, from a discussion about the benefits of delegating (both to free up your time, and give your team more opportunities to excel and rise to the occasion), tips on how to pick the right/best successor for your firm, why associate advisor compensation actually declined in the latest benchmarking study despite an ongoing talent shortage (hint: advisory firms are so desperate that they’re hiring those with less experience and less talent… and then paying them less in the process), and some good suggestions on what to ask (and what you may not ask) when interviewing a prospective associate advisor!

We wrap up with three interesting articles, all around the theme of gratitude and sharing (and accepting praise for) our good deeds: the first explores why it’s important to learn to accept compliments with gratitude and not just brush them off saying “It was nothing”; the second delves into the research on “virtue signaling” and when/whether it’s good to show off your own good deeds; and the last explores what you should actually do to accept a compliment with grace (and make the person giving the compliment feel appreciated for having done so!), including and especially when the compliment is from yourself!

Enjoy the ‘light’ reading!

Announcing The Kitces & Carl Podcast And New Kitces Team Members & Initiatives

June 24, 2019 07:07 am 0 Comments CATEGORY: Nerd's Eye View

The ongoing growth of the Nerd’s Eye View blog has made it possible for us to reinvest more and more into the overall Kitces platform, from the expansion into offering CE credits for CFP, IMCA/IWI, and CPAs, to the launch of the Financial Advisor Success podcast, and more. And as the platform continues to grow, we continue to reinvest more, into both the content and solutions we offer via Kitces.com itself, and the team that supports it. Which this month includes a number of exciting new announcements!

First and foremost, based on your feedback and requests, our popular Kitces & Carl video segments are now being made available as a standalone podcast: Kitces & Carl – Real Talk For Real Financial Advisors. Launching today, the podcast is now available directly on Apple Podcasts, Google Play, and Stitcher, starting with all the prior episodes we’ve already recorded in video format since the beginning of the year (which will be released at 1 per day for the next two weeks), and continuing with new episodes to be released every other week going forward (starting a week from Thursday). We hope you enjoy the content in a convenient audio format!

In addition, we’re excited to announce several new Kitces team members. Jim Koford joined us last fall as an Associate Editor, and is responsible for ensuring that all of our articles post properly and go out via the various email, social media, and RSS channels. And Brian Boyer is joining us as a new Director of Platform, responsible for both re-building the back-end of our Kitces platform as we prepare for the next stage of growth, and making site improvements for all of you – the readers – to make the Nerd’s Eye View and our Members Section easier to read, navigate, and use.

Through the second half of the year and into 2020, we’ll be working on a number of additional new features and enhancements as well, from adjustments to our search functionality and site/category navigation (to make it easier to find articles we’ve already written), more options about how you receive your Nerd’s Eye View blog emails, more audio content options, and overall improvements to the usability and navigation of the Members Section webinars and CE content. For those who are interested in having an even-more-involved role as a “beta tester” for new features rolling out in the future, you can submit your interest to beta@kitces.com, and we’ll be in touch as we begin work on some exciting new site features for 2020!

Notwithstanding the incredible growth we’ve already had with the Nerd’s Eye View over the past 11 years, I’m more excited and energized than ever to build the platform further and provide even more to the advisor community. So stay tuned for more announcements, more opportunities for feedback… and if you want to be a part of the Kitces team, more Career Opportunities as we continue to hire in the year(s) to come! ?

Pros and Cons of Completing a Rollover Before Year-End

December 13, 2018 02:27 pm 0 Comments CATEGORY: Taxes

For many individuals, their 401(k) makes up the bulk of their retirement savings, yet with an average of just over 10 job changes through one’s career, it’s not uncommon for people to have multiple (potentially expensive and restrictive) employer-sponsored retirement plans. Which means that transferring money out of various retirement plans into an IRA can be tremendously beneficial on many fronts, including lower costs and complexity, as well as increased investment options.

As we approach the end of the year, a common question on clients’ minds is whether or not they should consider rolling over money from their retirement plan into an IRA, and in this week’s #OfficeHours with @MichaelKitces, my weekly broadcast via Periscope and guest hosted this week by Jeff Levine, we discuss the benefits such a move, some of the potential pitfalls you might encounter along the way, and a few rules to keep in mind when making a rollover near the end of the year.

In order to understand the available options, it’s important to first understand the reasons for not rolling money between retirement accounts in the first place. For instance, clients who completed a Roth conversion earlier in the year that included after-tax dollars but still have pre-tax dollars in the traditional IRA would see their year-end balances impacted, making their prior conversion a lot less tax-efficient. Meanwhile, if a client wants to preserve and utilize a “still working” exception in order to delay RMDs from their employer-sponsored plans, then that option will be lost when rolling money into an IRA.

With that in mind, what are some good reasons to complete a rollover into the end of the year? First and foremost is convenience and ease. Because consolidating retirement accounts can reduce the complexity of keeping track of multiple accounts. This is particularly pertinent for individuals over 70 ½ who are subject to RMDs, since it doesn’t matter which IRA their RMDs are taken from as long as the total (and correct amount) is distributed, whereas RMDs must be taken from each employer-sponsored retirement plan account.

Meanwhile, clients who are interested in a making a qualified charitable distribution (where individuals can reduce their taxable income by using their RMD to contribute money to a charity), that QCD can only come from an IRA. Which, in turn, is based on the year-end balance in that IRA, meaning that there has to be money in the IRA in the first place! In a similar vein, clients who might want to purchase a qualified longevity annuity contract may not have that as an option in their employer-sponsored retirement accounts. Instead, a QLAC is more commonly purchased inside an IRA, but again, is subject to certain limitations that can be addressed by completing a year-end rollover.

Additionally, for clients over 70 ½ with a spouse that is at least 10 years their junior, rolling money into an IRA or other retirement account where that spouse is the sole beneficiary before year-end will lower the RMD from that IRA in the following year. And finally, rolling money from a 401(k) into a Roth IRA can be an effective means of reducing RMDs in the future, and is especially attractive at this time due to the lower tax rates (temporarily?) in effect following the passage of the Tax Cuts and Jobs Act.

Although there are some rules to keep in mind when taking advantage of these year-end planning opportunities at the end of the year, they aren’t terribly complex. Specifically, any money that leaves one account must be out before December 31st, but beyond the common timeframes for rollovers, it’s okay if the money doesn’t transfer into the receiving account until after January 1st. One thing that’s important to keep in mind for clients subject to RMDs, however, is that the custodian likely will not track that last minute change, and it will be up to the advisor to make sure to account for any year-end balance increases for the following year’s RMD.

Ultimately, the key point is to avoid completing any sort of rollover if it is not tax-efficient, but there are some good reasons to move money between tax-favored retirement accounts, particularly towards the end of the year, as well as opportunities for advisors to add value for their clients by helping them manage their tax exposure, particularly for those clients fortunate enough to not rely on distributions from their retirement account for income in retirement!

How Do I Tell My Client’s CPA Or Attorney That They’re Wrong?

November 29, 2018 01:13 pm 0 Comments CATEGORY: Client Trust & Communication

One of the most interesting aspects of being a financial advisor is the ability to gain insight into all sorts of different areas of clients’ lives. Far from the domains of “just” insurance and/or investments in the early stages of the industry, today, a true advisor helps define goals and aspirations, identify challenges, take advantage of opportunities, and optimize the accumulation and distribution of assets.

In fact, a favorite industry analogy is that a financial advisor acts as a sort of “quarterback” for their clients, giving impartial and helpful advice and acting as a trusted intermediary for a wide variety of relationships and interactions. And in order to provide the best advice and service to clients, advisors often gain, at the minimum, a working knowledge of a number of areas that fall outside the realm of traditional finance, including tax and legal issues.

Unfortunately, however, that disciplinary overlap has the potential to create interprofessional conflict, particularly when a client’s accountant or attorney might not be giving them the best advice possible, or worse, is simply wrong. Which in turn, raises the question: How do you, as a financial advisor, tell your client that their CPA or attorney is wrong?

In this week’s #OfficeHours with @MichaelKitces, my weekly broadcast via Periscope and guest hosted this week by Jeff Levine, we discuss potential pitfalls when addressing the issue of a client getting incorrect advice from another professional, specific steps to take in such a situation, and ways to ensure a positive outcome for everyone involved.

Because, even though you’re not trying to make anyone look bad, there are all sorts of problems that might arise if you don’t handle the situation properly, including: running into compliance issues by providing “legal or tax advice”; offending the accountant or attorney, because, after all, they’re the licensed experts in their respective field, not you; and, upsetting your client, since they might feel you’re calling into question the trust they’ve placed in their CPA or lawyer.

The question then is: How do you handle such a situation? Often it’s best to follow a three-step process, where the first step is to reach out to the professional in private and, while deferring to their expertise, indicate that there may be a misunderstanding or some miscommunication regarding the issue at hand. Next, refer to an outside source, preferably a thought leader, or notable expert in their field (i.e. a well-known attorney if you’re talking to an attorney, or a well-known CPA if you’re reaching out to a CPA – people tend to respond better from “advice” from their own profession) as the catalyst reaching out, and finally (and this is key), asking them for their thoughts, because (again) it’s important to defer to their expertise.

Because, ultimately, doing what’s best for the client sometimes require Solomonic tact, and ensuring that everyone involved saves face is the easiest way to do that. And, as an added bonus, you then might even have an opportunity to develop a new relationship with a center of influence after helping them navigate a potentially problematic situation.

Qualifying For The Section 199A Deduction As A Hybrid Insurance Producer

October 11, 2018 02:09 pm 0 Comments CATEGORY: Taxes

Included with the passage of the Tax Cuts and Jobs Act, was a new 20% tax deduction for “Qualified Business Income” (QBI) for pass-through entities, which was intended to give a tax break to small business owners and encourage them to hire more employees. The caveat, however, was that Congress also made sure that the deduction didn’t extend to high-income professionals whose primary source of income was from their own personal labors.

Accordingly, Congress carved out a new group of professionals in certain “Specified Service Trade or Businesses” (SSTB) whose qualification for the QBI deduction would be phased out above certain income levels.

Unfortunately, businesses in the financial services industry were included in the definition of SSTBs, particularly financial services, brokerage services, as well as “any trade or business which involves the performance of services that consist of investing and investment management, trading, or dealing in securities.”

Interestingly, however, Congress seems to have gone out of their way to specifically exclude from that list insurance producers, brokers, and agents, who are treated as being in the business of selling their company’s products, rather than their personal services.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1 PM EST broadcast via Periscope and guest hosted this week by Jeff Levine, we examine questions surrounding the QBI deduction for professionals who sell insurance products and want to retain the benefits of the QBI deduction, but are also involved in brokerage services and/or are RIA owners with SSTB income not eligible, and explore when/whether it’s better to run multiple businesses to preserve the deduction where permitted… and if so, at what cost?

The strategy of separating out QBI-eligible insurance business from non-QBI-eligible brokerage commissions and advisory fees is complicated by the fact that, in recent proposed regulations on the QBI deduction, the IRS declared that single businesses with multiple business lines and total revenues under $25 million, the entire business is considered to be a specified service trade or business if more than 10% of their income results from investment-related activities. Which means, for instance, that for someone with 89% of their income from their insurance-related activities and the rest from investment-related activities, their entire business will be considered an SSTB if they operate it as a single business (which means none of their 89%-of-revenue insurance commissions would be eligible for the deduction)!

Accordingly, the question then becomes: “When/how would it be better to split out the insurance production into a different business line, and effectively run multiple businesses?” Unfortunately, there’s no easy answer, because not only does running multiple businesses create a whole new layer of complexity and expense due to the potential need to keep separate books and records, but it also requires the business owner to allocate how much of their overhead costs apply to both the QBI-eligible insurance revenue and non-QBI-eligible other revenue. Which in turn raises the specter of potential IRS audits, since the business owner might be tempted to attribute as much expense as possible to the (not-QBI-eligible) financial services business income (which is SSTB income), while trying to minimize the expenses (and maximize the income) derived from the non-SSTB (QBI-eligible) insurance business line.

Ultimately, the good news is that it is theoretically possible to separate out and preserve the QBI deduction for insurance commissions, even for advisory firm business owners with a mixture of insurance and non-insurance business. But the aggregation rules of the recent QBI regulations mean that doing so will require a whole new layer of complexity for financial advisors to actually run two bona fide separate businesses, one for their insurance income (and expenses), and a second one for everything else. Which is a challenge because in the process of splitting up the business lines in order to qualify for the QBI deduction, the reality is that, after you factor in all the added expense and work involved, it just may not be worth it in the end unless there is a substantial amount of insurance commissions on the table!

Using Qualified Opportunity (Zone) Funds To Minimize Capital Gains

October 10, 2018 07:09 am 0 Comments CATEGORY: Taxes

Featured_Splitting Basis and Gains Using Qualified Opportunity Funds

Real estate investors have long enjoyed a number of unique tax benefits, from the tax deductibility of depreciation, to the ability to defer capital gains with a like-kind 1031 exchange. And beyond these core tax benefits of real estate investing itself, Congress has, from time to time over the years, provided additional tax incentives for particular types of real estate development opportunities, as a way to further guide where real estate developers may direct their capital. The latest version, created under the recent Tax Cuts and Jobs Act (TCJA) of 2017, is the so-called Qualified Opportunity Fund (QOF), which offers some especially unique tax benefits for those who are willing to invest in certain low-income areas designated as “Qualified Opportunity Zones”.

Specifically, investing into a QOF offers the ability to defer tax on capital gains from the sale of existing property that are reinvested within 180 days into a QOF (including not only a rollover of real estate proceeds akin to a 1031 exchange, but even allowing the rollover of capital gains from intangible assets like stocks), subsequent basis increases on deferred capital gains reinvested into a QOF after five years (and again after seven years), and the complete elimination of capital gains tax on growth attributable to gain reinvested in a QOF (if the QOF is held for at least 10 years).

The caveat, however, is that, in order to receive the full array of QOF benefits, the latest date (according to the current tax code) that gains on the sale of assets can be invested into a QOF is December 31, 2019. Past that date, investors will begin to at least partially lose out on basis increases and, thanks to what’s widely assumed to be poor drafting, potentially lose out on other future tax benefits as well. Furthermore, the deferral of the gains on the funds used in the initial investment isn’t perpetual. Gains timely reinvested into a QOF will become taxable (except for any basis increases received after years 5 and 7) at the end of 2026 (or when the QOF is sold, if sooner).

Meanwhile, despite the attractive tax benefits, advisors should exercise caution and perform their normal investment due diligence before jumping in with both feet. Bad investments with good tax attributes are, at the end of the day, still bad investments. Questions such as “What are the management team’s qualifications?”, “What are the expenses to investors of the fund?” and “What sort of assets (which, by their very nature, are illiquid) will the fund be targeting?” are all essential to answer. Not to mention the actual merits and growth or income opportunity of the particular real estate investment itself.

Nonetheless, investors who have sold appreciated assets within the past 180 days, or plan to do so in the near future, should evaluate the merits of investing into a QOF. However, the reality is that many investors’ tax planning needs will be better served by using existing strategies, including 1031 exchanges, charitable trusts, and simply holding on to existing assets – all of which may provide tax benefits, including indefinite tax deferral, and the opportunity for a future step-up in basis at death that a QOF does not provide.

Weekend Reading for Financial Planners (Sep 8-9)

September 7, 2018 02:51 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the recent announcement that President Trump has issued an Executive Order for the IRS and Department of Labor to review (and ease) the rules around Multiple Employer [retirement] Plans (MEPs) as a way to expand small business access to employer retirement plans, ideally bringing down costs through greater economies of scale, and at the least giving 401(k)-centric advisors a new way to work with small business owners (by creating and offering their own Open MEP solution?!).

From there, we have several articles about advisor marketing this week, from a look at how it’s not enough to just have a good value proposition for clients if you can’t also explain the process you’ll use to achieve it and provide some “proof” (e.g., sample deliverables) to show your results, to how to engage in a formal “marketing makeover” for your firm (which starts with crafting your own one-page marketing “messaging brief” before you hire anyone to help you implement it, why it’s so important to keep asking “why” (literally, over and over again) to prospects to truly understand their needs, and the reason that advisory firms doing in-person seminar marketing are now turning to Facebook digital advertising as a more cost-effective path to get prospects to attend their seminars in the first place.

We also have a few practice management articles, including: how to think through different types of financial advisor business models based on what’s actually being provided to clients (e.g., investment-only, investments with some planning as needed, planning with some investments as needed, or financial consulting only); why it’s crucial for advisory firm owners to separate out their compensation for the work in the business from their profit distributions for the income from the business; what it takes to successfully take a 6-week sabbatical away from your own advisory firm; and the issues to consider when your multi-advisor partnership actually has to “vote a partner off the island” and remove a partner from the business (without collapsing the business itself in the process!).

We wrap up with three interesting articles, all around the theme of better understanding our own motivations and focus: the first explores fascinating research that finds one of the best ways to help people improve their situation is not for them to receive good advice but actually for them to give it to others, which actually cements their own confidence in their knowledge and helps them formulate a specific plan of action (the one they’re recommending to others as well!); the second looks at how, in the end, there really are no “natural born salespeople,” just people who have a natural desire to help others and learn the very learnable sales skills and conversations it takes to succeed; and a fascinating look at how the popular wisdom to “find and pursue your passion” is awful advice, because, in reality, passions are more likely to evolve from something we actively do, not be something that already exists that we decide to pursue and do more of (which means it’s better to just start doing something you’re interested in and let the passion develop, rather than trying to intuit your passion in the first place).

Enjoy the “light” reading!

Why President Trump’s Executive Order on Multiple Employer Retirement Plans May Not Improve Access to Retirement Plans

September 6, 2018 01:45 pm 0 Comments CATEGORY: Retirement Planning

Last week, President Trump signed an executive order, which directed both the IRS and DoL to review existing rules and limitations regarding how small businesses can team up to offer retirement plans to their employees through a shared (and hopefully more cost-effective) arrangement known as a Multiple Employer Plan (or “MEP” for short).

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1 PM EST broadcast via Periscope and guest hosted this week by Jeff Levine, we discuss what multiple employer retirement plans (MEPs) are and their current challenges, how President Trump’s recent executive order would change MEPs and at least potentially improve retirement plan access for employees of small businesses (or not) , and why these proposed changes might ultimately have some concerning unintended consequences.

A relatively lesser-known arrangement, a multiple employer retirement plan (MEP) is an agreement between two or more unrelated business to band together to offer a 401(k) plan to their employees. The big benefit of MEPs is the opportunity to achieve lower costs through the economies of scale of banding multiple small plans together into one larger one. As small businesses have long struggled to find a way to effectively offer retirement plans to their employees due to historically higher investment costs, potentially burdensome administrative costs, and concerns about fiduciary responsibilities and liability. By pooling their resources, a group of employers can ideally utilize a MEP to streamline plan administration, bring down costs, and shed (by shifting to the MEP provider) some of their fiduciary obligations.

Unfortunately, up until now, there have been some big downsides to MEPs that have prevented them from gaining wider adoption. Because they are tax-deferred plans, they fall under the purview of both the IRS and the DoL, and that, in turn, has created some unique regulatory challenges. For instance, the IRS views a MEP as a single plan, which means that if any single employer within the MEP fails to meet its requirements to qualify for the plan, then the entire plan can be disqualified, also known as the “bad apple” rule. Meanwhile, the DoL does not automatically treat every MEP as a single plan, particularly if there’s no “nexus” (or commonality between employers), which can necessitate each plan still filing its own Form 5500 and significantly increase related administration costs for each of the employers in the MEP.

It’s these regulatory headwinds that the President’s executive order seeks to mitigate, by calling on both the IRS and DoL to clarify and expand the circumstances under which an employer can adopt a MEP, to issue new regulations to clarify when a group of employers can be viewed as a single employer under ERISA, and (maybe most importantly) to issue new regulations to narrow or eliminate the so-called “bad apple” rule so that the plan can remain in effect even when individual employers fail to meet their individual-firm obligations.

Nominally, the purported goal of these efforts is to make it cheaper and easier for small businesses to offer 401(k) plans to their employees and increase access to employer retirement plans for the nearly 1/4^th of full-time workers who don’t currently have one. Which should be feasible if MEPs really do become more attractive to small businesses, and the increased adoption even further reduces the administrative costs for the plans (especially if the DoL joins the IRS in treating participants in a MEP as a single employer for reporting purposes).

However, even if these changes happen, there are still some downsides to MEPs that employers must consider. For instance, under current law, it’s quite difficult for MEP participants to terminate their participation in the plan. Businesses that offer their own 401(k) plans are able to terminate that plan whenever they want, allowing employees to then roll their money into other tax-deferred vehicles (e.g., an IRA). However, while an employer can technically terminate their participation in a MEP, that termination does not create a distributable event for the employees, meaning that their money stays “stuck” in the MEP (and cannot be rolled over unless in-service distributions are permitted), while the employer continues to have a fiduciary responsibility as long as there is at least one employee still in that plan (even if the employer otherwise no longer offers it)!

Meanwhile, there is also the risk that when a large number of disparate small businesses come together into a shared plan, it becomes harder for any of them to individually negotiate for better terms, and that plan providers could ultimately be able to increase plan costs if they can gather enough MEPs under their umbrella, given the substantial burden on employers and their participants to switch providers. Also, paradoxically, by making MEPs a more viable option (if they really do end up being lower cost), it could make IRA rollovers a relatively less attractive option for employees (which benefits 401(k) plan providers but adversely impacts those who rely on IRA rollovers to build their businesses).

Ultimately, we should see some specific proposals from IRS and DoL within the next 6 months or so, and given the bipartisan support for these changes, it’s likely that we will see some changes to MEP rules that really do make them more feasible. But whether it actually leads to lower costs and greater access remains to be seen. Although at the least, it could eventually produce some interesting new opportunities for financial advisors to expand their services and offer their own multiple employer retirement plans as a service to their clients!?

Weekend Reading for Financial Planners (August 25-26)

August 24, 2018 02:54 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with news about the latest IRS regulations that definitively close the door on the potential for individuals in high-tax-rate states to preserve their SALT deductions by converting them into charitable deductions to state-run charities instead, as the Service declares that donating to a state-run charity in exchange for a state tax credit amounts to a quid-pro-quo transaction that would reduce the deductible amount of the charitable contribution all the way to $0. Also in the news this week, though, was a look at what kinds of tax policy changes the Democrats might take up and propose in 2019, including repealing the SALT cap, if they are in fact able to retake control of Congress in the mid-term elections this fall.

Also in the news this week were a number of interesting articles about the economy and markets, including a major revision from the Bureau of Economic Analysis to the personal savings rate data that reveals the U.S. consumer is actually saving at a whopping 7.2% rate, which is well above 30-year averages (despite the fact that the so-called “wealth effect” normally decreases personal savings rates late in the economic growth cycle), the revelation that labor markets are becoming so tight that the mid-summer unemployment rate for 16-24-year-olds has dropped to a 52-year low, and a look at the recent buzz around President Trump’s proposal for changing quarterly earnings reports and guidance to become semi-annual (twice-per-year) instead and why, if we really want to reduce the focus on earnings and market volatility, the key is not to report earnings less often to instead to make the guidance more often (e.g., monthly or even daily through technology) so no one data point is ever so impactful anymore.

We also have several behavioral finance articles this week, from a look at what to do when clients don’t follow our advice (and why oftentimes clients aren’t actually looking for advice from their financial advisor about a major decision anyway, and really just want support for the decision they already made instead), to the importance of culture in determining whether advice is appropriate (or even relevant) for a client, why trying to imagine yourself in someone else’s shoes is actually a terrible way to understand their perspective (and how it’s far more effective to just ask them to share their perspective), and how managing clients so they don’t panic in a bear market isn’t just about dialing down the volatility in their portfolios so it doesn’t trigger any emotional fear in the first place, but also looking at how we as advisors can create ‘circuit-breakers’ that help to prevent a volatile market event from translating all the way into an actual hasty and ill-timed action.

We wrap up with three interesting articles, all around the theme of balancing financial wealth and time: the first looks at how one the greatest challenges in wealth accumulation is that we think of wealth in terms of the outwardly expensive things that people own (fancy homes, cars, and jewelry) when in reality it’s the decision not to buy those things that are the greatest driver of wealth (which means wealth is best created by what we don’t see, not by what we do see!); the second explores the trade-offs between time and money, and how sometimes the best advice we can give is not about how to prudently save money, but how to prudently spend money in order to save time instead; and the last explores the reasons why very affluent individuals sometimes choose to remain anonymous and unseen with their wealth, preferring instead to be rich but not famous (an important mindset for advisors to understand about their clients)!

Enjoy the “light” reading!

Weekend Reading for Financial Planners (Nov 9-10)

Weekend Reading for Financial Planners (Oct 5-6)

Announcing The Kitces & Carl Podcast And New Kitces Team Members & Initiatives

Pros and Cons of Completing a Rollover Before Year-End

How Do I Tell My Client’s CPA Or Attorney That They’re Wrong?

Qualifying For The Section 199A Deduction As A Hybrid Insurance Producer

Want CE Credit for reading this article?

Using Qualified Opportunity (Zone) Funds To Minimize Capital Gains

Weekend Reading for Financial Planners (Sep 8-9)

Why President Trump’s Executive Order on Multiple Employer Retirement Plans May Not Improve Access to Retirement Plans

Weekend Reading for Financial Planners (August 25-26)

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