The Best Of Weekend Reading 2025: The Top 23 Articles You Might Have Missed

Retirement Planning

20 IRA Mistakes To Avoid

(Christine Benz | Morningstar)

Individual Retirement Accounts (IRAs) are a popular way for individuals to save for retirement, thanks to their flexibility and low costs (with the Investment Company Institute estimating that these accounts held $15 trillion in assets as of September 2024). Nonetheless, IRAs are associated with a host of rules and strategies during both an investor's accumulation and distribution phases, offering advisors an opportunity to help clients get the most value out of them (and perhaps fix 'mistakes' in IRAs new clients bring to a firm).

For accumulators, one way to make the most of an IRA is to make contributions early in the year (rather than close to the deadline of April 15 of the following tax year) in order to give the contributions more time to compound. In addition, choosing strategically between traditional or Roth contributions (or perhaps a combination of the two) in a given year based on a client's financial situation (e.g., making Roth contributions in unusually low-income years) can help maximize the IRA's tax benefits. Also, for clients who are interested in making Roth IRA contributions but whose income puts them over the annual limits, using the "backdoor Roth" strategy can be an attractive option (and, given the implementation and recordkeeping requirements of these contributions, including the IRA aggregation rule, this can be a way for advisors to offer significant value!). And when it comes to investing funds in an IRA, using asset location principles (e.g., avoiding putting tax-advantaged investments like municipal bonds in an IRA) and using the broader investment options in an IRA (compared to many 401(k) plans) to diversify a client's portfolio can help maximize a client's total wealth.

Advisors can also add value for their clients in the distribution phase. At a basic level, ensuring that clients take their Required Minimum Distributions (RMDs) on time is a valuable service in itself, as the penalties for missed RMDs can be steep. In addition, advisors can help clients consider options for how to use their RMDs, whether by engaging in Qualified Charitable Distributions (QCDs) to mitigate the tax impact of the distributions or, for any RMD funds that aren't needed for ongoing spending, ensuring they remain invested (perhaps within a taxable brokerage account) to allow these dollars to continue to grow into the future. For clients with Roth IRAs, advisors can also add value by following the five-year rule for Roth contributions (to ensure that the withdrawal of growth in the account will be tax-free). Also, ensuring that clients' beneficiary designations are correct can help ensure that their IRAs pass to the intended recipients upon their deaths.

In sum, given the number of potential 'mistakes' that can be made when it comes to using IRAs, financial advisors are well-positioned to support clients in all life stages in maximizing the many benefits of these accounts, offering hard-dollar value in the process!

How Clients Can Sustain Real Withdrawals Beyond 30 Years

(Edward McQuarrie | Journal of Financial Planning)

With life expectancy increasing over the past several decades, retirees’ (particularly couples’) portfolios might need to support a retirement that could extend beyond 30 years. Given this timespan, inflation (particularly if it occurs early in their retired years) represents a key risk to ensuring sustainable and consistent spending over the course of a client's retirement.

Given this backdrop, some retirement researchers have explored the potential benefits of incorporating Treasury Inflation-Protected Securities (TIPS) into retirement portfolios, as they provide protection against inflation while also offering an additional yield. A problem, though, for retirees relying on TIPS to protect against longevity risk is that the longest available maturity is 30 years. For retirees who retired relatively early or who have longer life expectancies, this could mean that they couldn't guarantee sustaining this stream of real income beyond the 30-year period.

With this in mind, McQuarrie explores two alternative ways to 'extend' safe real withdrawals beyond 30 years. First, a retiree could use the yield available on TIPS (specifically, the amount that exceeds what is needed to fund a steady withdrawal rate) to extend the "ladder" (i.e., purchasing TIPS with maturities in each year of retirement to fund annual spending needs) by purchasing additional TIPS to extend the length of the inflation-protected income. For example, a retiree looking to withdraw 4% each year (adjusted for inflation) from their portfolio of TIPS and who is able to purchase TIPS yielding 2% would be able to extend their 'ladder' by 4.7 years. Notably, this strategy is only effective when TIPS yields are at least 1.25%; anything below that would lead to a withdrawal rate of less than 4% for the 30-year period.

A second option to extend sustainable withdrawals is to take the additional yield generated by TIPS (beyond that needed to fund annual withdrawals) and invest it in stocks. Given the strong long-run returns offered by stocks (and the 30-year horizon for needing to use the invested funds), such a strategy could add additional years onto a TIPS 'ladder', dependent on returns that are achieved. For instance, with a TIPS yield of 2% and a 4% real return from equities, a retiree could extend their 'ladder' by 8.4 years. While offering greater upside than purchasing additional TIPS, this strategy does introduce some risk (e.g., if a particularly deep and lengthy market downturn were to occur), so particularly risk-avoidant clients might prefer the former approach.

Ultimately, the key point is that advisors have multiple ways to support clients looking to protect against inflation risk for a potential retirement lasting longer than 30 years. In addition, advisors can offer value for clients by being aware of periods when TIPS yields are particularly attractive (and can therefore generate greater inflation-protected income) to build a 'ladder' and by exploring other possible options (e.g., perhaps delaying claiming Social Security, whose cost-of-living adjustments make it a particularly valuable stream of inflation-protected income).

4 Ways To Beat Sequence Of Return Risk

(Jennifer Lea Reed | Financial Advisor)

Sequence of return risk, the concept that even if short-term volatility averages out into favorable long-term returns, a retiree could still be in significant trouble if the sequence of those returns is unfavorable, is one of the primary threats to a client's lifestyle in retirement (though, notably, a positive series of returns early in retirement can create significant upside potential for the client's retirement income as well).

Amidst this backdrop, retirement researcher Wade Pfau identifies several ways financial advisors could help their clients mitigate sequence risk. One strategy is to have the client delay claiming Social Security benefits until age 70 (when they will receive a larger, inflation-adjusted monthly benefit for the rest of their lifetime) and create an income 'bridge' during the years between leaving work and age 70 using relatively low-risk assets (e.g., a 'ladder' made up of Treasury Inflation-Protected Securities [TIPS]), which can both extend the expected longevity of their portfolio and allow for greater income (through the larger Social Security benefit) even if it is eventually exhausted. A second option is to use a flexible withdrawal rate strategy (e.g., retirement income 'guardrails'), where a client's spending is adjusted upward or downward based on market performance (which can allow for a higher initial withdrawal rate, at the expense of potential future years with reduced spending).

Next, an advisor could consider implementing a "rising equity glide path", where a client starts with a lower stock allocation early in retirement and then increases it over time (to protect against a negative market environment early in retirement and, if one does happen, have greater participation in an eventual recovery by having a larger equity allocation). Finally, a client could hold a "buffer asset" outside of the portfolio to cover income needs during a market downturn, which can allow them to avoid selling equities after they have declined in value. Pfau suggests that such buffer assets could include cash, a variable rate reverse mortgage, or the cash value of a life insurance policy or the amount borrowed against it (and while these buffer assets can come with costs [e.g., interest owed], he suggests this can often outweigh the risk that comes from a potentially poor sequence of returns).

In sum, while sequence of return risk is a challenge for advisors and their clients navigating the early years of retirement, several strategies are available to help mitigate it. And by considering more than one option, advisors can find the best 'fit' for a given client's preferences and circumstances!

Social Security Planning

Balancing Social Security, Retirement Income, And Legacy Interests To Meet Client Goals

(Jason Kephart | Morningstar)

Much of the conversation surrounding retirement income involves strategies to efficiently and sustainably generate income from a client's portfolio over the course of their remaining years. However, since most clients will also receive Social Security benefits, incorporating this additional income stream (and deciding when to claim benefits) can help an advisor craft a strategy that meets client goals both for lifetime income and legacy interests.

To demonstrate how the results of different approaches can vary, Morningstar applied various spending methods to a hypothetical client with a $1 million starting portfolio balance, a $36,000 Social Security benefit at age 67, a 3.7% fixed real withdrawal rate, and 2.3% inflation adjustments (for both Social Security benefits and portfolio withdrawals). The 'base case' chosen is a client who retires and claims Social Security benefits at age 67. Under the above assumptions, this client would have $73,000 in first-year spending, $2.19 million in lifetime spending and a median ending portfolio balance after 30 years of $1.33 million. Compared to this 'base case', an individual who retires and claims Social Security benefits when initially eligible at age 62 would be worse off on all three metrics, with total first-year spending of $63,000, lifetime spending or $1.89 million, and a median ending portfolio balance after 30 years of $1.25 million (though they might have other reasons for wanting or needing to retire earlier).

Given the potential benefits of waiting to claim Social Security, Morningstar also looked at individuals who leave the workforce before 70, but wait until that age to claim benefits. The best-off retirees (among the scenarios tested) are those who can implement a "bridge" strategy by having their spending needs covered by sources outside of their portfolio (e.g., a spouse working or rental income). Such an individual would have first-year spending of $82,000, lifetime spending of $2.46 million, and a median 30-year ending portfolio balance of $1.30 million. For those who don't have such a "bridge" (and therefore must withdraw from their portfolio to support their spending needs between ages 67 and 70), first-year spending was $77,000, lifetime spending was $2.31 million, and the median 30-year ending balance was $1.15 million. Notably, for this latter case, the client would have greater first-year and lifetime income compared to the base case of claiming Social Security at age 67 but ended up with a lower ending balance, suggesting there could be a tradeoff with such an approach for legacy interests.

In the end, while a client's decision of when to retire and when to claim Social Security benefits will depend on a variety of factors (e.g., health, life expectancy, and spending needs), advisors can offer value by showing them the tradeoffs involved in different decisions (and perhaps by implementing flexible strategies that can potentially result in greater retirement income than fixed withdrawal strategies) to help them pick the best option for their unique preferences and needs!

Giving Retired Clients More Money To Spend Using A Social Security 'Bridge' Strategy

(John Manganaro | ThinkAdvisor)

While delaying claiming Social Security benefits can often be a smart move for clients, unless they plan to work until age 70, they will very likely need to generate income from other sources to meet their lifestyle needs until they eventually claim their benefits.

Amidst this backdrop, a recent analysis from the Bipartisan Policy Center outlines how a Social Security 'bridge' strategy can ultimately prove beneficial for many clients. Notably, individuals (and their financial advisors) have several ways to construct this 'bridge', whether in taking distributions from investment accounts to meet annual spending requirements (perhaps using a 'bond tent' to mitigate sequence of return risk) or by purchasing an annuity to serve as a source of guaranteed income in the absence of Social Security benefits. The analysis finds that by doing so, many individuals can ultimately spend more over the course of their retirements (and potentially make their assets last longer) than those who claim early (e.g., in one hypothetical example, a middle-income retiree requiring 80% income replacement would 'only' need 12 years to recoup the cost of the 'bridge'), with the added benefit of gaining 'longevity insurance' from the larger lifetime Social Security benefit.

In the end, while a client might be hesitant to spend down (a potentially significant) portion of their assets relatively early in retirement, a Social Security 'bridge' strategy could ultimately provide them with greater income over the course of their retirement without necessarily having to make lifestyle sacrifices in its early years. Further, given the need to properly calculate the size of the 'bridge' (notably, retired actuary Ken Steiner has created a series of actuarial models that advisors might find helpful to support this task)  and the various options to construct it, financial advisors are well-positioned to help clients craft the most effective strategy for their individual circumstances!

4 Reasons Why A Client Might Want To Claim Social Security Benefits Now

(Sheryl Rowling | Morningstar)

Financial advisors typically are aware of the potential long-term benefits of delaying Social Security benefits. Notably, though, these benefits (i.e., a larger monthly payment) only start accruing once Social Security is claimed (and take several years to overcome the several years of 'missed' payments resulting from the delay).

With this in mind, there are a few scenarios where a client might choose to claim benefits (perhaps significantly) earlier than age 70. For instance, some individuals who retire relatively early (perhaps based on physical conditions impacting their ability to work) might not have sufficient assets or other income sources to support their lifestyle for the next several years (this could be particularly common for advisors supporting individuals in a pro bono setting), in which case they might struggle to meet their needs in the absence of Social Security benefits. Other clients might derive a psychological benefit from having a source of guaranteed income today, even if it means reducing their potential lifetime spending. And still others might have a compelling personal health reason to believe they will not live long enough to accrue the benefits of a delayed claiming strategy. Finally, some individuals might be nervous about the potential haircut to benefits that could occur if the Social Security trust fund is exhausted and want to ensure they receive several years of benefits before then (even if doing so is in effect a permanent haircut in itself).

Ultimately, the key point is that while the benefits of delaying Social Security benefits are compelling in many client cases (particularly those with sufficient income or assets to 'bridge' the delay period and those with longer life expectancies), some clients might be in a situation where claiming benefits earlier fits their goals, whether financial (e.g., having more income earlier in retirement, even if it means having less later) or psychological (e.g., having a steady source of guaranteed income once they leave the workforce).

Tax Planning

How To Avoid RMD Mistakes Around Roth Conversions

(Robert Bloink and William Byrnes | ThinkAdvisor)

Clients who have retired but have not yet reached their Required Beginning Date (RBD) for Required Minimum Distributions (RMDs) from their 'traditional' retirement accounts (e.g., IRAs and 401(k)s) are often seen as prime candidates for (partial) Roth conversions, as this can be a period of relatively low income (allowing the client to 'fill up' lower tax brackets through Roth conversions, as these dollars might eventually be taxed at a higher rate if left in accounts subject to RMDs). However, some clients might consider Roth conversions even after their RBD, perhaps because they remain in a relatively low tax bracket (even with the RMD obligation) and/or for legacy purposes (e.g., if they are currently in a lower tax bracket than the expected tax bracket of the future inheritor[s] of the account).

Notably, advisors with clients who might benefit from post-RBD RMDs can offer value for their clients by being aware of IRS ordering rules concerning RMDs and Roth conversions. To start, it's important to recognize that a client's RMD cannot be converted to a Roth (despite both RMDs and Roth conversions representing ordinary income) and that any RMDs due for the year must be taken before they can execute a conversion. For instance, a client who takes their RMD in monthly installments to support their income needs could run into trouble if they execute a mid-year Roth conversion before their full RMD is fulfilled.

If such a mistimed Roth conversion is identified, the client has until the due date of their Federal income tax return, plus extensions (typically October 15 of the following year), to correct the mistake (otherwise they face a 6% penalty for each year the excess contribution remains in the account). Importantly, a 'converted' RMD is not considered to be a 'missed' RMD (so clients don't have to worry about a potential 25% penalty for missed RMDs), but rather an excess contribution to their Roth IRA, the 'fix' for which is to remove (by the deadline) the contribution as well as the earnings on the excess (known as Net Income Attributable [NIA], which is subject to taxation and is calculated based on the Roth account balance when the excess was contributed and the account balance at the time the excess is withdrawn and are taxable).

In sum, financial advisors can add value for their clients not only by calculating the potential benefit of a (partial) Roth conversion in a given year, but also (for those who also have RMD obligations) by ensuring that the RMD and conversion are timed appropriately to avoid the converted amount being considered as an excess contribution to the client's Roth IRA (or, perhaps for new clients who might have already made an RMD/conversion 'mistake', helping them correct the error before the relevant deadline to avoid any tax penalties!).

Capital Gains And Capital Pains: Are Tools Used To Defer Capital Gains Worth The Price?

(Robert Huebscher | Robert’s Substack)

Whether it's a sizeable chunk of their company's stock or long-held shares of a single company, many investors will find themselves holding positions with significant embedded capital gains within their taxable portfolios. Which, from a portfolio management perspective, can create concentration risk, as changes in the price of the large position could have an outsized effect on the performance of the broader portfolio. While an advisor might recommend selling at least a portion of the stock for diversification purposes, doing so can lead to a large tax bill (given the significant embedded capital gains in the position).

Given this backdrop (including the run-up in stocks over the past 15 years that has left many investors with significant embedded gains), a variety of solutions have emerged that allow investors to diversify away from a large position while deferring the realization of capital gains (at least for a certain period of time). Though, as Huebscher explores, these strategies come with tradeoffs, whether in terms of challenges executing them properly or the costs associated with them (e.g., for instance, assuming a 5% discount rate and a 20% capital gains rate, each year capital gains are deferred is equivalent to earning and extra 1% on the investment [or 1.85% if the tax rate is 37%], which could serve as a point of comparison with the costs of gains deferral strategies).

One strategy that has gained attention is the Section 351 ETF, where investors seed an ETF with stocks (with the cost basis of the holdings carrying over to the ETF), giving the investor immediate liquidity and some diversification. A key limitation, though, is that the largest holding cannot be more than 25% of the amount seeded by the investor (and the top five holdings cannot be more than 50% of the amount seeded), meaning that an investor with a large concentrated position would need to contribute three times the amount of that position to the ETF and incur the expenses of the ETF on those assets as well (which could be much higher if the other assets being contributed are individual stocks or low-cost ETFs). In addition, Section 351 ETFs might not provide the same level of diversification as a broad-market index ETF (in particular, they could be heavily weighted towards technology given those with concentrated positions in that sector have seen significant gains over the past several years).

Another option to defer capital gains while achieving greater diversification is an exchange fund, which has fewer restrictions than Section 351 ETFs on the type of assets that can be contributed, but comes with significant liquidity limitations and has its own fees as well. Also, investors could consider 'side portfolios', where a concentrated position is hedged (e.g., using an options 'collar') to protect against losses while the side portfolio is used to harvest losses (allowing a certain amount of the concentrated position to be sold without incurring capital gains tax liability). These strategies also come with their own costs an complications, whether in using a margin loan to implement the side portfolio (e.g., when taking short positions in companies similar to that of the concentrated stock), paying fees associated with a direct indexing platform, or managing the complexity and minimum asset requirements of variable-prepaid forwards.

Ultimately, the key point is that there is no 'free lunch' when it comes to achieving greater diversification while deferring capital gains on concentrated positions. Which provides an opportunity for financial advisors to support their clients by helping them evaluate the various products and strategies available and determining whether they are superior to holding onto the position (which might be appropriate for an older client whose heir might benefit from a step-up in basis) or (perhaps slowly) selling it off to create a more diversified portfolio, even if it means incurring some capital gains taxes in the process.

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 to 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 (partial) 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!

Investment Planning

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).

Examining The Conventional Wisdom Around Portfolio Rebalancing

(Robert Huebscher | Robert’s Substack)

Both financial advisors and consumers are likely familiar with the concept of portfolio rebalancing, or returning the portfolio to a desired asset allocation, whether over defined periods (e.g., quarterly or annually) or based on tolerance thresholds (e.g., when an asset class drifts 15% from its target allocation). Rebalancing is often thought of as a prudent strategy that could boost returns (e.g., by increasing allocations to assets that have lagged, anticipating reversion of their returns in the following period) and reduce portfolio risk (e.g., by ensuring that no asset class becomes too overweight in the portfolio).

Nonetheless, citing research using real-world and hypothetical performance data, Huebscher calls this 'conventional wisdom' into question. First, he finds that rebalancing doesn't result in an unambiguous performance 'bonus', as while rebalancing produced a higher return than buy-and-hold in about two-thirds of the scenarios studied, buy-and-hold outperformed by a larger margin in the scenarios where it had better returns (and these returns were before taking into account transaction costs and potential capital gains tax exposures that rebalancing can generate). In terms of risk management, he concludes that there is a negligible difference in risk-adjusted return between rebalancing and buy-and-hold, regardless of rebalancing frequency. And while a buy-and-hold strategy increases volatility as measured by the standard deviation of returns, he suggests this might not be an appropriate risk measure for clients with a long time horizon (and the standard deviation includes upside volatility as well).

Altogether, Huebscher concludes that while the purported performance-enhancing and risk-mitigating benefits of rebalancing might be overrated, rebalancing can still offer benefits in certain client situations, whether to align a client's portfolio to their risk tolerance (and capacity) or as part of a broader asset allocation change (to a lower-risk portfolio) when clients have accumulated sufficient assets to support their lifestyle needs. Which ultimately suggests that advisors can add value by gaining a deep understanding of their clients’ ability (and need) to handle risk and implementing an appropriate rebalancing strategy accordingly (perhaps using tolerance bands, which can lead to fewer rebalances and less portfolio turnover than time interval-based strategies).

How To Evaluate Private Fund Returns When Considering Opportunities For Client Portfolios

(Jack Shannon | Morningstar)

Private assets have gained increased attention in the investment space in recent years, in part due to the 2022 investment environment, where both stocks and bonds saw sharp declines, and amidst private investment industry efforts to increase the availability of private assets to retail investors. However, given that private investments have different characteristics from their counterparts, evaluating these potential opportunities can be a challenge, even for seasoned investment professionals (e.g., while they can offer investors access to the many businesses and other asset types that aren't traded in public markets, they can also be more opaque and have more limited liquidity).

One possible benefit of investing in private assets is that they offer an "illiquidity premium", or higher returns that investors receive in exchange for a decreased ability to buy and sell the investment. However, comparing the returns of asset classes such as private equity and venture capital to those of publicly traded assets can be challenging. For instance, while mutual fund and ETF returns are time weighted (i.e., they receive your money immediately so the return 'clock' starts immediately), private fund returns are traditionally measured on a money-weighted basis through the calculation of their Internal Rate of Return (IRR), given that calls for investor capital and distributions back to investors are made over time (with the IRR representing the discount rate that makes the present value of cash inflows and outflows equal to zero). Which can lead to misleading comparisons, as early returns of capital (or delayed deployment of investor capital) can inflate the IRR, even if the total multiple returned was the same. Ultimately suggesting that comparisons of IRRs to compounded annualized returns can be misleading.

Another consideration for evaluating private funds is to consider whether mean or median returns are being discussed. Because private fund returns (particularly those for venture capital funds) tend to be skewed to the right (i.e., a few big winners pull up the average returns for the entire group), the average return in a category tends to be higher than the median return. Which highlights the importance of manager selection when it comes to investing in private funds, as while top managers might be able to outperform publicly traded counterparts, it's less likely that a random manager or fund will be able to do the same (and identifying top managers can be a challenge in itself given that the performance of a firm's previous funds are not necessarily known when it raises money for a new fund). Advisors can also potentially make better comparisons to publicly traded funds by using an appropriate benchmark; for instance, a small-cap index fund might be a better benchmark for a private equity fund (that invests in relatively smaller companies) rather than the broader S&P 500.

Ultimately, the key point is that private funds represent a form of active management, albeit one with a steeper learning curve than publicly traded, actively managed mutual funds and ETFs. Which suggests that advisors who are willing to put in the time to evaluate these investments could find opportunities for clients for whom the unique characteristics of private funds might be attractive (and perhaps serve as a differentiator for their practice), while others might elect to stick to public markets and use the time savings for other planning or business management tasks.

Insurance Planning

A Framework For Helping Clients Determine The 'Right' Amount Of Insurance For Their Needs

(Victor Haghani and James White | Advisor Perspectives)

While a client might intuitively understand the need for different insurance policies, choosing the 'right' balance among premiums, deductibles, and coverage levels can be a challenging endeavor and an area where financial advisors can offer value.

Haghani and White highlight the potential benefits of an "expected utility" framework for evaluating financial decisions in the face of uncertainty. For instance, if a client with a $2 million net worth owned a $1 million home that had a 0.5% chance of total loss in a given year, a $1 million x 0.005 = $5,000 premium would be actuarially fair. While buying such a policy wouldn't enhance the client's risk-adjusted wealth (as the premium represents the exact value of the asset times the chances it will need to be replaced), the client has significantly reduced its risk of needing to replace an asset that represents 50% of its net worth.

However, because insurance premiums also include a margin for the issuing company (covering expenses, commissions, and profit), the decision of whether (and how much) to insure can become trickier. Given this fact, the authors (who created a calculator to help address this issue) suggest that advisors and their clients take into account several factors when making the decision, including the amount of the client's total wealth represented by the asset (e.g., it will likely make more sense to insure against loss to a home rather than a dishwasher), the client's risk tolerance (with a higher risk tolerance perhaps leading clients to self-insure against certain potential exposures), and their ability to cover different levels of loss (which could call for increasing the deductible on the policy, leading to lower premiums).

In sum, while clients often have a distaste for paying insurance premiums in general (as they might never receive a payout on a particular policy), advisors can help them strike a balance that reflects their most significant exposures, risk tolerance, and ability to absorb losses in order to avoid a major loss that would be severely detrimental to their financial goals while not paying for coverage that exceeds their unique needs.

Disability Insurance: A Frequent Client Blind Spot

(Carroll, Hadjian, Collier, and McCoy | Journal of Financial Planning)

When asked about their most valuable asset, a working-age client might mention their home or an investment account. However, in reality, many of these clients' most valuable asset is their ability to earn income in the years and decades ahead. And while this idea is often discussed in the context of purchasing appropriate life insurance, maintaining adequate disability insurance coverage is sometimes overlooked by clients.

The authors argue that despite its expense (particularly for individual policies), disability insurance can be attractive given the combined chances of a disabling event (with a 2021 review by the Council for Disability Awareness [an insurance trade group] finding that the chances of a healthy 35-year-old experiencing a disability before retirement age are approximately one in four) and the potential impact of a long-term disability on one's income (particularly for high earners). In addition to obtaining disability coverage in the first place, different features can greatly impact the attractiveness of these policies. For instance, own-occupation policies (which state that if the client cannot perform every duty associated with their own occupation, the policy will pay benefits) are more likely to pay out benefits (though tend to have higher premiums) than any-occupation policies (which only pay if the client cannot perform the duties of any occupation for which they are qualified based on education, training, or experience).

In addition to helping clients evaluate policy terms, advisors can offer support by helping clients determine an appropriate amount of coverage based on their needs. For instance, while a client's employer might offer group coverage, it might not be sufficient to cover the lost income from an extended period of disability, perhaps calling for research into individual disability policies (in addition, benefits from any employer-paid coverage will be taxable, which could reduce the after-tax value of the disability benefits). Also, it's important to determine the benefit that will actually be paid on a particular policy; for instance, group disability coverage is frequently based on salary (and not bonuses or commissions) and can sometimes include a cap (which, for high-income clients, could be much lower than the standard 60% of salary often covered by these policies).

Ultimately, the key point is that because disability coverage is often overlooked by clients, advisors can offer significant value not only by highlighting the potential value of this coverage and determining the potential need for a given client (including exploring the cost/benefit tradeoff), but also digging into the specific terms of a given policy to ensure that they fit the client's needs.

Education Planning

How 529 Plan Assets Affect College Financial Aid

(Hyunmin Kim and Margaret Giles | Morningstar)

529 plans offer a tax-efficient means of saving and paying for college expenses. Notably (among other benefits), distributions from 529 plans are tax- and penalty-free to the extent that they are used for the beneficiary's qualifying education costs. Nonetheless, some families interested in saving for college might hesitate to contribute to these plans because of their potential impact on financial aid eligibility.

While 529 plan assets can affect the amount of financial aid a student might be offered, their impact might be less than many clients assume. To start, when calculating a parent's expected contribution to paying for college (using the FAFSA form), 529 plan assets are assessed at 5.64% (i.e., a 529 plan with $10,000 would reduce the federal aid package by at most $564), much lower than the 25% to 47% for parental income, though this only applies to parent-owned plans (as student-owned plans are assessed at up to 20% of the account value). In addition, the 2022 FAFSA Simplification Act boosted the benefits of 529 plans, including by only considering 529 plans where the student is the beneficiary in financial aid calculations (so that 529 plans where the beneficiary is a sibling won't impact a student's aid, though this does not apply to the CSS Profile, which is used by many private schools to determine aid packages), and no longer considering 529 plans owned by grandparents or other relatives when it comes to assessing the student's ability to pay for college.

Altogether, while 529 plans have long been a tax-efficient way to save for a child's educational needs, recent developments in how financial aid eligibility is determined (along with the option [subject to certain restrictions] to roll 529 plan assets to a Roth IRA), could make them even more attractive for clients (particularly those who might be eligible for need-based financial aid).

The Pros And Cons Of 4 Alternatives To 529 Plans For College

(Cheryl Winokur Munk | The Wall Street Journal)

When it comes to education planning, the first option on many advisors' (and clients') minds is often a 529 plan, given their ubiquity and tax benefits. Nevertheless, given the restrictions on the use of funds in these plans (though these are looser than many clients might assume, including the more recently established ability to rollover funds to a Roth IRA, subject to certain conditions), some clients might look to other (perhaps more flexible) options to save for college.

One option is to simply save within a taxable brokerage account. Doing so provides significant flexibility in terms of investment options (as 529 plans typically have a limited pool of investments to choose from and can also come with trading restrictions) as well as the use of the funds in the account (i.e., if a child doesn't end up needing all of the funds in the account, the parents could use it for their own retirement or other purposes without penalty). On the other hand, investing within a taxable brokerage account might not be as tax efficient as using a 529 plan, as the client will owe taxes on investment income and realized capital gains (whereas 529 plans offer tax-free growth and tax-free qualified distributions).

Another option is to use assets in a Roth IRA for education costs. Contributions to Roth IRAs can be withdrawn tax-free and parents could also consider receiving tax- and penalty-free withdrawals on earnings if the funds are used for qualified education expenses and if the account has been open for at least five years. Like taxable brokerage accounts, Roth IRAs will likely have access to a broader investment universe, and unused funds could be used for non-education purposes. However, given the annual limits on Roth IRA contributions (meaning that they might not be able to 'replace' all of the funds used for education purposes), clients considering this option to fund their child's education will likely want to ensure they have other assets available to support their retirement (in addition, they might be reluctant to give up additional years of tax-free growth of assets in the Roth IRA before they need the assets in retirement!).

Still other clients might consider opening a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account, which are opened by parents for a minor beneficiary. While these can offer investment flexibility, they are counted as student assets for financial aid purposes (which can increase the family's expected contribution more than parent-owned assets) and don't give parents full control over them (as the child can use the assets for any purpose once they reach the age of majority). Finally, clients might tap into a whole life insurance policy by borrowing against the accumulated cash value (which might be an option for those who aggressively fund policies early in a child's life to give the cash value time to grow), though fees and returns (which might be higher and lower, respectively, than available investment options in a brokerage account) associated with these policies (in addition to the accumulated interest from the loan) might make them less attractive than other options.

Altogether, those looking to save for a child's (or grandchild's) college education have a variety of account types to choose from. Which offers an opportunity for advisors to show clients the impact of different options in terms of potential tax savings, investment options, and flexibility (with some clients perhaps choosing to use multiple account types).

Client Communication

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 is 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 show 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).

Using A Master List To Uncover Clients' 'Real' Goals

(Steve Wendel and Samantha Lamas | Morningstar)

It's a common practice for financial advisors to ask clients about their goals (both personal and financial). Which can help the advisor craft a financial plan that gives the client a strong chance of reaching these goals and living their best lives. However, doing so assumes that clients are aware of their true goals in the first place (and can relay them to their advisor quickly and clearly after being asked).

Amidst this backdrop, a study conducted by Morningstar first asked people to list their top investing goals. The researchers then provided participants with a list of common investment goals (e.g., to care for aging parents or to retire early) and asked them to reselect their top goals, drawing from both their original list and the 'master list' of options. The study found that 73% of people changed at least one of their top goals after seeing the master list, with the final list being quite different for many participants. For instance, while some individuals listed broad, vague goals on their original list, exposure to the 'master list' sometimes led them to create more specific, vivid goals. The 'master list' also helped some individuals adjust initial goals that were solely focused on financial outcomes to goals framed in terms of their emotional and personal value.

In sum, prospects and clients might not have fully formed goals ready when asked about them by their advisor, and even those that do could potentially benefit from exposure to potential goals that they might not have previously considered!

Practice Management

4 Unconventional KPIs That Actually Measure Productivity

(Libby Greiwe | NAPFA Advisor)

As the end of the year approaches, many financial advisory firms will look back at their performance in 2025 and set goals for the coming year. A key part of this effort, though, is to pick the 'right' metrics to track based on the firm's objectives (to ensure it's not chasing numbers that are less relevant to its success). With this in mind, Greiwe offers four Key Performance Indicators (KPIs) that can help a firm gauge its productivity.

First, taking stock of the different types of client interactions the firm has during the year and rating them based on their impact can reveal the touchpoints that are particularly effective and those that the firm might spend less time on in the coming year (this exercise can be enhanced by also rating the difficulty level of each interaction and identifying those that hit the 'sweet spot' of being high impact but low difficulty). Next, while firms might gauge their total revenue, looking at the revenue per hour worked can reveal which types of clients are associated with the greatest productivity (e.g., a client who generates $5,000 of revenue per year but only takes 10 hours to serve might be more valuable to the firm than a client who generates $10,000 of revenue but takes 25 hours to serve).

In addition, tracking the percentage of time spent directly working with clients can signal when administrative creep is taking up more of an advisor's time (which could be an opportunity to delegate some of this work to an employee or an outsourced solution). Finally, instead of tracking the total number of client referrals the firm receives, tracking the number of referred prospects who fit the firm's ideal client profile can demonstrate whether client referrals are productive, the firm is doing a good job articulating its niche, and if the firm is delivering a frictionless experience that encourages clients to talk about it with friends and family.

Ultimately, the key point is that, given the seemingly unlimited number of available KPIs to track, zeroing in on those that get at the heart of a firm's productivity can help a firm both save time on data tracking and focus its efforts on the actions that are most likely to generate the greatest return in the coming year and beyond!

A Blueprint For Building Advisory Career Paths

(Ray Sclafani | ClientWise)

When making a new hire, an advisory firm might be looking to fill a specific role needed at that time. However, the individual being hired is likely to see the current position as just the start of a potential long-term career at the firm. Which suggests that creating (and communicating!) a career path for new hires (and current employees) can ensure they have an understanding of how they might progress within the firm, promoting employee engagement and retention in the process.

The first step to designing a career path (after naming it!) is to define the different career stages in the firm. For instance, an employee might advance from an entry-level associate or analyst position where they learn technical and operational aspects of the job to a mid-level lead advisor or manager position where they shift towards client-facing responsibilities and leadership to a senior-level partner or principal role where they are involved in strategic firm leadership, to, finally, an executive CEO or managing partner role. Next, the firm can identify core competencies (e.g., technical, relationship management, business development) for each role that align with the firm's objectives. With these core competencies established, firms can create structures for mentorship and training (to actively develop employees) and measurable milestones (so employees know what is required of them to advance to the next level).

In addition to establishing competency standards and training plans to help employees get there, firms can establish compensation and incentives aligned with career progression (which might include base salary increases, bonus structures, and more), as well as provide a clear path to partnership or leadership roles. Finally, firms can encourage career planning conversations, potentially through quarterly check-ins and individual professional development plans, to ensure employees know where they are on the career path and what it will take to get to the next level.

Altogether, these steps provide a blueprint for establishing durable career paths for employees while allowing for employee-specific flexibility along the way (e.g., establishing senior technical specialist roles for employees not interested in management positions). Which can lead to greater employee satisfaction and its follow-on effects, from more effective succession planning to greater staff continuity for clients.

Talent Is The Tipping Point: Why The Right Team Makes Or Breaks RIA Growth

(Penny Phillips | Advisor Perspectives)

When looking to take their firm to the next level (whether in terms of growth, efficiency, or another metric), firm leaders might look to technology solutions, new processes, or proven systems. However, Phillips suggests that human talent (who can embrace 'chaos', handle adversity well, and adapt to change) is what lies at the heart of progress for firms, with five particularly key roles at the heart of each firm.

To start, firms looking to scale typically have a "leader" who has a clear vision of how the firm will grow and evolve, is willing to make the hard decisions to move the firm in that direction and can clearly communicate their vision to ensure the full team understands the "why" and prevent operational confusion. Second, such firms typically will have an "operator" who takes the "leader's" vision and turns it into systematic execution by optimizing processes and coordinating teams, reducing operational and administrative burdens for client-facing advisors. Third, the "rainmaker" maintains a steady pipeline of qualified prospects (and has this function as their primary responsibility), managing multiple client acquisition tactics (so the firm isn't reliant on one marketing method for growth).

Next, high-growth firms often have "technicians", dedicated planning professionals who focus exclusively on plan creation, technical analysis, giving client-facing more time to spend meeting with clients (and often leading to better planning outputs given that these specialists can focus on staying up to date on technical developments). Finally, "care specialists" are in charge of ongoing relationship management (e.g., client communication, meeting scheduling, and email follow-ups), strengthening client loyalty and retention while allowing advisors to focus on strategic conversations rather than administrative follow-up.

In sum, successfully scaling a financial planning firm is a team effort, with clearly defined roles for different employees that allow them to spend time on their strengths while freeing up time for colleagues to focus on what they do best (ultimately leading to better client service and a more efficient business).

Advisor Marketing

How One Advisor Generated 35 Leads On LinkedIn In 6 Months (Without Spending On Ads)

(Kendra Wright | Rebel Media)

Social media can be a tempting way for advisors to reach prospective clients, given that posting is free (at least in terms of hard-dollar cost) and many advisors are spending time there anyway. However, engaging on social media without a defined strategy can lead to inconsistent posting schedules and a lack of engagement (and results) for the time invested.

Working with an advisor who was posting inconsistently across multiple channels, Wright first recommended that he engage in "channel focus" (i.e., choosing a primary marketing channel and going all-in on building one marketing funnel for their firm around that channel). After deciding to focus on LinkedIn, the advisor focused his posts on content targeted to his ideal target client (rather than more general personal finance topics) and engaged in deeper storytelling (e.g., case studies and examples with hypothetical numbers instead of dry descriptions of planning strategies). He also improved the consistency of his posts, showing up on LinkedIn daily to stay top of mind with his ideal clients. In addition, he actively seeks out individuals who match his ideal client profile to further expand his reach. Together, these efforts led to more than 35 inbound leads in the first six months of 2025 and a close rate of approximately 50% (indicating that he's attracting qualified prospects).

In the end, successful advisor marketing doesn't require being active in as many spaces as possible, but rather can be a function of finding alignment between the advisor's strengths and their chosen tactic, narrowing in on one platform (and one ideal client type) to target, and creating engaging content targeted at this group's needs. Which not only can be a more sustainable approach (given that the advisor's attention won't be spread in different directions) but a more profitable one as well (as they target individuals who are more likely to be qualified [and interested] prospects!).

A Framework For Assessing And Developing Your Sales Skills

(J.J. Peller | Journal of Financial Planning)

While financial advicers might not see themselves first as salespeople, sales skills can be important, not only in convincing prospects to become clients, but also in advocating for oneself when it comes to promotions or new business opportunities. Which suggests that taking the time to assess and develop one’s sales skills could be a worthwhile investment.

To start, an advisor might first do a simple gut check to determine the sales-related activities they enjoy and the ones they don’t (which can provide insight into areas to lean into and skills to develop). Next, identifying role models (who have proven to be effective in sales) and observing them in action can provide valuable insights and tactics for a next-generation advisor to emulate (e.g., an advisor might assess how a more senior advisor engages in active listening with prospects). Also, putting these tactics into practice can be an opportunity for both self-reflection (e.g., what went well and what didn’t) and to get feedback from others in the meeting (as they might have seen a positive or negative action that you might have missed).

While sales is a multifaceted process, Peller suggests there are three key skills for advisors to focus on. First is to deeply believe in the value they and their firm can deliver, which can allow them to come across with conviction and as a genuine individual when meeting with prospects. Next, being effective at sales is often a matter of being able to ask questions in a genuinely curious way (e.g., showing actual interest in the answer rather than asking a leading question intended to elicit a certain response). Finally, while some might think that an advisor’s pitch is the most important part of the sales process, being a good listener is also a crucial component (including the ability to tolerate periods of silence, as they can often lead prospects to express themselves more fully).

Ultimately, the key point is that while a newer advisor might not have gone through formal sales training (as many advisors who started in the product sales world did), they can take matters into their own hands by assessing their strengths and weaknesses, identifying advisors at their firm or in their network with strong sales skills to observe, and seeking regular feedback to hone their sales skills and move their career forward.