Weekend Reading For Financial Planners (April 18-19)

McKinsey Report Addresses 6 Key Questions About The Future Of Financial Advice Amidst Growing AI Capabilities

(Diana Britton | Wealth Management)

In recent months, there has been significant talk of a “SaaSpocalypse”, where investors have started to revalue software-as-a-service businesses amidst concerns that Artificial Intelligence (AI) tools could be used to displace them in the marketplace. A similar moment happened in the wealth management industry in February, when RIA custodian Altruist unveiled an AI-enabled tax planning workflow in its Hazel advisor workspace platform and publicly traded wealth managers subsequently saw mid-to-high single digit declines in their share prices. Which brought to the public’s attention a question that’s been discussed in the industry for the past few years: what does a world of advancing AI capabilities mean for the human-powered financial advice business?

Using research data compiled on the wealth management industry, consulting firm McKinsey & Company in a recent article addresses several key questions on the minds of industry participants and observers. To start, the firm calls the prediction that AI will make the leap from automating tasks to replacing the role of the advisor a “significant overstatement”, particularly for high-net-worth and ultra-high-net-worth client segments (as clients don’t just value the planning software output that advisors provide, but more so the accountable judgment and behavioral coaching advisors can provide). McKinsey is also skeptical about significant fee compression resulting from AI; while clients might demand a deeper level of planning than they can get from software tools, firms that are able to use AI to automate certain tasks could free up time to offer additional or more in-depth planning services to meet this demand.

That said, the article identifies several areas that have been differentiators for human advisors in the past but might not remain so in the years ahead. These include data extraction, generation of plan scenarios, and identification of “standard” tax or rebalancing triggers. Nonetheless, there remain several ‘moats’ that firms could exploit to maintain their position in the marketplace, including accountability for complex decisions and the technical and legal ability to securely turn a recommendation into a completed transaction, all in an environment where the demand for advice remains strong and where the industry faces a potential talent shortage in the years ahead.

In the end, financial advisory firms have long sought to differentiate themselves in the marketplace of advice, from both other human advisors and technological solutions that have emerged over time (e.g., robo-advisors). While the AI era has yet to fully play out, it appears that the next step in this evolution could be leaning into what makes human advisors ‘human’, including the ability to leverage their experience and judgment, build durable relationships with clients, and serve as a trusted partner for what can be a multi-decade (or even multi-generational) planning relationship.

CE Providers Call For Transparency On CFP Board Reporting Fees

(Patrick Donachie | Wealth Management)

Like professionals in many other industries, financial advisors with the CFP certification are required to earn a certain number of Continuing Education (CE) hours to demonstrate their ongoing education in the field of advice. With more than 100,000 CFP professionals each being requirement to complete 30 hours of CE every two years (which is increasing to 40 hours next year) within a breadth of different CE topics, more than 1,200 CE providers have emerged to meet this demand. Which creates an administrative burden for both the CFP Board (to certify providers and process certificants’ credit hours earned) and for the CE providers themselves (in accurately determining who earns credits and reporting them to the CFP Board).

In addition to this administrative burden, back in 2022 the CFP Board also rolled out a financial cost for CFP professionals to have their CE hours recorded, where CE providers are required to collect and pay between 50 cents and $1.25 per credit hour (depending on the volume of CE hours reported) on behalf of CFP professionals to satisfy their CE requirements. Which in turn has caused CE providers to bear additional implementation costs for the CFP Board’s reporting fee collection system (perhaps as much as $2 million across the range of 1,200 providers that each have to adapt their systems). All to collect what amounts to a flat fee of approximately $18.75 per CFP professional, given CFP Board’s fee of up to $1.25 per CE-hour for which all CFP professionals are required to earn an average of 15 CE hours every year (30 hours every 2 years). Which, in light of the current count of approximately 107,000 CFP professionals, means the CFP Board is triggering ~$2M+ of CE provider costs (that ultimately CFP professionals must bear) just to collect 107,000 x $18.75 = ~$2M per year in CE reporting fees. .

Amidst this backdrop, a group of CE providers has formed a “CE Provider Coalition” (Editors’ Note: Kitces.com is a founding member of the Coalition) to call for greater transparency around the fees, including the administrative costs and redundant credit card fees they are triggering (which raises the cost of mandatory CE for CFP professionals), as well as how the CFP Board is using the revenue. Because while the CFP Board originally said the reporting fees were “required to support significant growth in the number and diversity of CFP professionals”, now the organization claims the fees are necessarily to cover its own operational costs of administering the CE program (even though the CFP Board has not substantively reinvested into its technology systems for CE reporting in the past 3 years). And in practice the organization appears to be working to grow its own series of CE offerings for its certificants with the recent hire of a new “Managing Director of Program Development” to explicitly lead “innovation, development, and delivery” of programs. Not only putting the CFP Board in a position of competing directly with the CE providers it regulates (a very substantive conflict of interest), but also having these CE providers fund the CFP Board’s competition through the CE reporting fees the CFP Board has mandated them to collect and remit.

In the end, while administering a CE program is no doubt a time- and financially-intensive endeavor for the CFP Board (and an important one, given the need for public trust that CFP professionals continue to hone their craft through CE), the tiered per-credit-charge model is disproportionately increasing costs for CE providers and CFP certificants alike. With this in mind the CE Provider Coalition has suggested that perhaps the costs of administering the program be incorporated into the CFP Board’s certification fee (which jumped last year from $455 to $575), which would actually reduce the total cost to CFP professionals (by bringing down the administrative and implementation costs for CE providers, along with the redundant credit card fees that are incurred when CFP professionals pay CE providers who then pay the CFP Board), while also being more transparent for all parties involved (though ironically the CFP Board may take some heat from its certificants to make its costs more transparent and salient, as many CFP professionals may not have realized how so much of their rising CE costs in recent years were attributable to the CFP Board’s indirect CE reporting fees approach!).

More than 40% Of Heirs Spend Entire Inheritances Within One Year: Study

(Dinah Wisenberg Brin | ThinkAdvisor)

For many individuals who leave assets to their children, grandchildren, or others, their hope is that these assets can serve as part of their legacy, perhaps providing a level of financial security for their heirs or offering them educational or other opportunities they might not have had otherwise. However, a recent study suggests that such bequests are sometimes fleeting and might not have the lasting impact decedents might have hoped for.

According to the research (based on 3,005 inheritances by heirs ages 50 an older, with an average inheritance size of $133,000), 42% of heirs had their net worths fall back to, or below, their pre-inheritance level 12 months later (suggesting they spent the inheritance during this time). Notably, when comparing inheritances to other types of windfalls (e.g., gifts, proceeds from lawsuits), and adjusting for the (larger) size of the inheritances, heirs were 24% more likely to immediately spend through this amount compared to other windfall recipients, suggesting that inheritances might be treated differently (perhaps being spent down sooner as the money might come with negative memories associated with the death of the loved one). At the same time, 43% of heirs saved the entire inheritance, indicating that blowing through an entire inheritance isn’t universal.

Ultimately, the key point is that while financial advisors and their clients are often focused on transferring funds to the next generation as tax efficiently as possible, this study serves as a reminder of the potential value of controlling when assets are distributed (e.g., spreading distributions from a trust over a certain period of time) or perhaps communicating the client’s goals for the money to heirs (whether through legal documents or informally through conversations) with heirs, which can be arranged well before they pass away!

Three Steps To Offering A Deeper Level Of Tax Planning Services

(Joe Halpern | Advisor Perspectives)

While some clients might think about their tax obligations on a regular basis, tax filing season is an acute reminder of how much they paid in taxes throughout the year (and perhaps motivate them to find ways to reduce their tax burden). Which offers an opportunity for financial advisors to step in and offer tax planning recommendations that can help their clients reduce the amount of taxes they owe (on next year’s return and/or their lifetime tax bill), demonstrating hard-dollar value in the process.

To start, advisors can ensure that the ‘basics’ are being completed, from ensuring that contributions to retirement accounts are actually being made in the amount decided on in the client’s financial plan to creating and executing an HSA strategy to funding 529 plans if appropriate for the client. These items don’t necessarily require advanced planning, but rather a systematic approach that ensures that planning recommendations are implemented.

A second level of tax planning value involves being aware of technological developments that can offer clients tax savings. For instance, the growth of direct indexing platforms over the past several years has opened the door for a wider range of clients to the potential tax-loss harvesting benefits it can offer (as investing in the individual components of an index can create more loss harvesting opportunities compared to investing in a broader index fund itself). For a subset of clients, an emerging range of tools can help manage concentrated stock positions, including Section 351 exchanges and long/short strategies, amongst others.

A third, lower-tech level of tax planning revolves around framing returns in after-tax terms, which can help advisors ensure assets are located in an efficient manner across a client’s accounts, put different investment opportunities into perspective (e.g., a fund that offers potentially higher returns but pays out significant income might not be as attractive as other options), and can serve to better evaluate client-specific outcomes (e.g., the value of investing in municipal bonds can differ based on a client’s tax bracket). This can also offer an educational opportunity for advisors, as clients who understand the value of after-tax thinking can better look beyond the ‘headlines’ of investment products that might not be appropriate for their individual case.

In the end, at a time when many advisors have allocated time away from the hunt for investment ‘alpha’, generating ‘tax alpha’ can be an effective (and perhaps more predictable) way for advisors to offer value for their clients and potentially generate significantly more goodwill come tax time next year and for years to come!

What Tax-Time Mistakes Reveal About Hidden Planning Gaps For HNW Investors

(Tara Popernik | Advisor Perspectives)

One day, an advisor might themselves fielding a call from a client who experienced a tax return ‘surprise’ after receiving their completed return from their CPA, perhaps a (much) larger tax bill than they expected. This scenario can be a bad surprise for the advisor as well, who might have had high confidence in the client’s tax planning for the year.

Such tax season surprises often aren’t the result of incorrect calculations or estimates, but rather the result of insufficient communication amongst the client, their financial advisor, their CPA, and other advisors in their orbit. For instance, a client with accounts not controlled by their financial advisor (whether managed on their own or with a different money manager) might make transactions (e.g., wash sales) that can be costly come tax time. Also, clients might be hearing different recommendations from their financial advisor, CPA, and/or estate planning attorney, which can lead to fragmented strategies, insufficient information sharing, and improper execution. Finally, clients might put off implementing strategies until the last minute, which could lead to missed deadlines and disappointment come tax time.

In sum, financial advisors can play a valuable role not only in recommending tax planning strategies, but, perhaps more importantly, creating a systematized process for communicating them with a client’s other financial professionals to ensure all parties are on the same page and that the recommendations are actually executed. Which can ultimately lead to less stress (both at year-end and during tax filing season) and fewer surprises, for clients, financial advisors, and related professionals (who might be more willing to make referrals to a financial advisor who makes an effort to communicate and coordinate tax planning recommendations?).

How Advisors Can Add Value By Managing Client Tax Refunds

(Retirement Tax Services)

Each year, taxpayers typically find themselves either receiving an income tax refund or owing additional money to the government. For many, receiving a refund is seen as a ‘win’ (“Thanks for the money, government?”) while owing money is seen as a loss (“I have to pay even more in taxes than I already have?!”).

Given the emotions around tax refunds/bills, financial advisors can play a valuable role in helping clients achieve their desired outcomes. For instance, while an advisor might be tempted to be a wet blanket when a client celebrates a refund (“Did you know you just made an interest-free loan to the government??”), different clients might have varying perspectives on whether they want to receive a refund or owe more at the end of the year. For instance, some clients might have already mentally budgeted their tax refund for spending or other purposes (perhaps paying a semi-annual property tax bill), others might want to minimize taxes paid during the year as much as possible (while avoiding underpayment penalties), and still others might prefer to take a middle ground and bring their refund/taxes owed as close to $0 as possible.

For advisors, this could mean approaching these client conversations not from a place of judgment, but rather with a sense of curiosity to understand their motivations while also ensuring they understand the options available to them and the consequences of different choices (while withholding judgment of a client’s ultimate choice). Advisors can then add value by helping clients execute on their chosen path, including by ensuring withholdings and/or estimated tax payments are made properly and by communicating with the client’s tax preparer about the plan (to both avoid any surprises down the line and to build a relationship with a key member of the client’s financial team).

Ultimately, the key point is that the salience of tax refunds/bills (which often sticks out more in a client’s mind than their total tax bill for the year) makes this a high-value planning point for financial advisors to address when it comes to building trust and loyalty with clients. Which suggests that creating an annual process to review clients’ tax returns, taking the time to understand their refund preferences (and recording them in the firm’s CRM), and properly executing the decided-upon approach could be a valuable investment of an advisor’s time.

How 5 Likes On A LinkedIn Post Can Lead To 3 High-Quality Clients A Month

(Kendra Wright | LinkedIn)

When engaging in content marketing (whether writing a blog post, hosting a podcast, or posting on social media), it can be gratifying to see a large number of individuals reading, listening to, and/or ‘liking’ this content. However, total engagement with pieces of content doesn’t necessarily correlate with the number of quality leads an advisor gets from producing it.

For example, one advisor was able to generate 12-16 prospects and 2-3 new clients per month by creating posts on LinkedIn that only averaged 5-8 ‘likes’ per post. The key to his success started with posting with only one clear ideal client (in his case, a specific type of attorney) in mind (to help build his audience, the advisor made 100 targeted connection requests each week using LinkedIn’s Sales Navigator tool). This both allowed him to focus his content on certain high-impact topics and to keep his feed relevant for his target audience (rather than posting on a wider range of topics that might not have been of interest to this particular group). He also saved time by going ‘all in’ on LinkedIn, rather than spending time creating content across multiple types of media (which allowed him to create daily posts that kept his audience engaged). Which ultimately allowed him to build trust with his audience, many of whom would take the next step towards becoming a client (which he made easy through an email list and a Calendly link to schedule a meeting in his LinkedIn profile).

In the end, the effectiveness of a content marketing strategy isn’t necessarily about the amount of engagement each piece of content receives, but rather whether it’s being seen by individuals who fit an advisor’s ideal client persona and are more likely to see themselves as good fits for the firm. And by going ‘all in’ on a specific platform and creating content for this ideal persona, advisors can reach the ‘right’ individuals while saving time in the process!

Leveraging Marketing Automation Platforms To Turbocharge An RIA Marketing Funnel

(Sam McCue | XY Planning Network Blog)

While getting consumers to engage with an advisory firm’s content can be gratifying, this is just the top of the marketing ‘funnel’ that will hopefully lead them to become a client. Given that nurturing clients through the different levels of the funnel could be a time-intensive process (e.g., if an advisor was manually sending out emails to each lead), a variety of marketing automation platforms are available that can automate these touchpoints and save advisors’ time.

Notably, these platforms can vary based on several factors, including price, user capacity, features, and the time needed to get up to speed. McCue’s go-to pick is HubSpot, which he finds offers intuitive lead nurturing and forms, an easy-to-navigate interface, and strong customer support. One potential downside is that while its starter plan is relatively inexpensive, there’s a big jump in price to the next tier if the firm plans to grow significantly with HubSpot. A less-expensive option (that a firm won’t grow out of) is Mailchimp, which offers a range of helpful features (e.g., A/B testing for campaigns) but can be relatively harder to learn, according to McCue. Finally, for those looking for a financial advisor-specific solution, McCue highlights Advisor I/O, which offers out-of-the-box email campaigns to quickly start the flow of touchpoints with leads.

In sum, the range of marketing automation platforms (of which these are just a few) offers advisors the opportunity to seek a solution that has their desired features at a price point that allows them to increase the chances that the tool will ultimately save them time for more high-impact activities and deliver a strong return on investment.

3 Growth Strategies That Won’t Plateau As The Firm Grows: Build Scalable Processes Into Double-Digit Growth

(Stephanie Bogan and Sydney Squires | Nerd’s Eye View)

Advisory firm founders often work tirelessly to develop processes for attracting good-fit clients. This painstaking effort to balance where viable prospects are with what the advisor is naturally inclined to do can eventually pay off in steady growth. Yet just as the firm begins to grow, these once-reliable pipelines often plateau. Referrals tend to slow, marketing techniques that once worked feel noisy and ineffective, and next-generation advisors may struggle to prospect while founders become increasingly consumed by operations and spend more time working in the business rather than on it. The result can feel like hitting a wall at the very stage where growth should be most reliable.

A key challenge is that many growth engines depend heavily on the founder's personal time and energy. If growth has primarily come from networking, for example, the founder eventually reaches the outer limits of viable prospects. Other approaches, such as digital lead generation, can be expensive without a defined conversion process. In other words, growth strategies that once worked often become barriers when the founder needs to step back from front-line marketing to focus on leading the firm.

Fortunately, there are several ways to reinvigorate foundational growth engines and make them scalable. Referrals, for example, remain the most efficient path to high-trust client relationships. Yet today's clients – especially those in younger and higher-income segments – are less likely to rely on referrals, and most firms lack a formal system to encourage them. By deliberately engineering advocacy into the client experience – identifying client 'champions', mapping referral-ready moments, prompting naturally, and reinforcing behavior with gratitude – firms can transform referrals from a passive hope into an intentional, repeatable driver of growth.

Founders can also strengthen their sales funnel by creating a structured, scalable process that doesn't rely on their own presence. Narrowing the target to a few key marketing channels and mapping multi-step sales processes can dramatically improve conversion rates and client quality, while also enabling non-founder advisors to execute them. Over time, a defined, trackable funnel allows firms to focus on fewer but better client opportunities – often resulting in significantly higher close rates!

Equally important is aligning service and profitability. Firms can't sustainably grow if they overserve underpaying clients or deliver inconsistent value. By right-sizing the client base, introducing service tiers tied to value, and systematizing delivery, firms can improve margins while freeing advisor capacity. When done well, these shifts allow firms to eliminate low-margin relationships, reclaim time, and reinvest resources into high-impact growth initiatives.

Ultimately, achieving double-digit growth isn't about flashy marketing tactics – it's about having scalable processes and a service model that supports the firm. Each growth component reinforces the others, creating a self-sustaining cycle that fuels growth without overwhelming the team. Rather than doing more, the fastest-growing firms focus on doing a few things exceptionally well. With a repeatable growth engine and the operational structure to support it, firms can achieve sustainable, long-term growth!

Who Had It Harder: Boomers Or Millennials?

(Joe Pinsker, Paul Overberg, and Drew An-Pham | The Wall Street Journal)

It can seem like every generation says “we had it tough” compared to members of subsequent generations. In recent years, there has been much debate about the relative economic hardships faced by the Baby Boomer generation and Millennials (many of whom are the children of Boomers).

Moving beyond anecdotes, the authors dig into the data to see which generation had it “tougher” in various areas at different points in their lives. First, looking at inflation-adjusted median income, Boomers (defined here as those born between 1946 and 1964) and Millennials (born between 1981 and 1996) show earnings at roughly the same levels during the period when each group was between 25 to 34 (which, while seemingly a ‘tie’, could be frustrating to Millennials given relatively strong economic growth since the Boomers entered this period), with Millennials seeing a boost above median Boomer income levels during their age 35 to 44 years (which would be a ‘win’, though struggles that some Millennials had earlier in their careers [which coincided with the Great Recession for many] could linger in their minds).

Looking at housing affordability, Boomers faced a tough environment amidst double-digit mortgage rates seen during their prime years, while some Millennials might be struggling with higher housing prices experienced since the pandemic. Overall, while the peak of median new home prices (adjusted for inflation, median household income, and mortgage rates) was higher for Boomers (occurring in approximately 1980), Millennials are also facing a challenging environment today (though those who were able to purchase a home during the 2010s experienced greater purchasing power).

Assessing differences in the costs of particular goods paints a mixed picture, with incomes outpacing prices over time for areas such as groceries and new vehicles, but trailing in terms of child care and college tuition (on this latter point, Millennials held significantly higher student loan balances upon graduation than did Boomers). Looking at the bigger picture, Millennials average net worth now exceeds baby boomers’ at similar ages (particularly for those who were able to take advantage of the strong stock market performance of the past 15 years and/or the rise of home prices during that time (though Boomers are faring much better in terms of median net worth at the same age compared to their predecessors).

In the end, there’s no definite answer as to whether Boomers or Millennials had it tougher, in no small part due to the widely varying experiences of individuals within each generation. Which might be an unsatisfying resolution but perhaps suggests greater empathy for the challenges faced by each generation might be in order?

The Adulting Tax

(Hanna Horvath | Your Brain On Money)

For adults, the modern age could be seen as a time of abundance, from modern technologies that seemingly make life more convenient to the seemingly unlimited number of food and entertainment options available. At the same time, many individuals in their 20s and 30s (and beyond) are feeling more stressed than ever as they balance a range of seemingly full-time responsibilities (e.g., employment and child care) and other tasks that can eat up significant amounts of one’s free time.

A challenge for many individuals is dealing with what Columbia Law School professor Elizabeth Emens calls “life admin”, or the office work of life, including everything from scheduling appointments to paying bills to disputing charges. For instance, according to one study, adults on average spend eight hours and 48 minutes on personal administrative tasks (which would add up to more than five years of their lives). In addition to actually performing life admin tasks, the many decisions an individual has to make during any given day or week can contribute to one’s “mental load” (i.e., the invisible labor involved in anticipating needs, identifying options, deciding, and finally monitoring them), which can further raise stress levels.

Notably, while the 21^st Century offers many conveniences previous generations could only have dreamed of (e.g., the ease of using Google Maps compared to folding/unfolding a paper map), it has also introduced new levels of “sludge”, or friction that’s added to discourage individuals from doing something a company doesn’t want them to do. For example, while it’s easier than ever to subscribe to a publication or service (usually with just a couple clicks on one’s smartphone or computer), unsubscribing can be a much more laborious process (as the companies want to hold onto users’ business). This can be particularly challenging for individuals to deal with when they’re exhausted (e.g., after a long day at work or a tough evening with kids), which can lead to financial problems that only compound one’s stress.

In sum, the “adulting tax” is a challenge faced by all adults given the complexity of managing life today. Nonetheless, there are some options available to reduce this burden, whether it’s “buying time” by paying to have certain services done (for those who can afford to), using task management systems, or trying to simplify one’s life by reducing the number of choices that need to be made and tasks that need to be completed (with financial advisors being well-positioned to support clients with financial-related tasks). Which could offer some reprieve, though navigating modern life will nonetheless almost certainly remain a challenging endeavor.

Long-Term Money

(Morgan Housel | Collaborative Fund)

While not necessarily in every sphere and for everyone, life in general has gotten noticeably better over the centuries. From modern medical advances (with common antibiotics curing ailments that might have been deadly just generations ago) to the ease of travel (sorry horses).

At the same time, improvements in the quality of life can also lead older generations to consider their successors to be ‘spoiled’ in the opportunities available to them and, in particular, the dangers and challenges they no longer have to deal with (particularly if a child or grandchild is griping about a seemingly minor inconvenience). Nonetheless, such progress doesn’t just ‘happen’, but rather is the result of the work individuals put in to make a better life for their children and grandchildren. Which suggests that that the hard work that individuals put in to improve the lives of their families can cumulatively lead to society-wide advances that make life easier for the next generation.

In sum, the ‘inheritance’ that younger generations receive from their ancestors often goes well beyond any specific financial interest to include living at a time when the problems they will face are often narrower in scope. Though, given that the world remains far from perfect, younger generations also receive a charge to do their best to make life just a little bit easier for their descendants as well!

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