Weekend Reading For Financial Planners (April 25-26)

79% Of Advisory Firms Plan To Change Their Operating Model In Coming Year Amidst Onboarding, Integration Concerns

(Leo Almazora | InvestmentNews) 

Financial advisory firms can differ on a variety of levels, from the types of clients they serve to the operating model on which they operate. While not flashy, this latter consideration (which has both advisor- and client-facing aspects) nevertheless is a key determinant of how well a firm can scale into the future. 

According to a report by industry consulting firm F2 Strategy (which surveyed 36 wealth management firms representing $9 trillion in assets across the RIA and broker-dealer channels), 79% of respondents indicated that they plan to make changes to their operating model within the year (with 13 firms rating their satisfaction with their operating model as a “3” on a 5-point scale, and only 5 firms giving it a “5”). The report found that while firm’s aren’t lacking technology (amidst a growing universe of AdvisorTech tools), achieving integration across a tech stack remains a thorny problem (that involves both the tools themselves and a potential lack of team expertise to bring them together), with respondents citing it as the top unmet skill in their firm (followed by data/analytics and product management). In terms of sources of friction, client onboarding stood out amongst respondents (cited nearly 30% more than any other process), as firms appear to be juggling the number of handoffs and workflows involved in bringing on a new client (which can potentially constrain a firm’s ability to handle an influx of new clients and potentially negatively impact the new-client experience). 

Ultimately, the key point is that while advisory firm leaders have many tasks on their plate (from attracting new clients to assessing the firm’s tech stack), a strong operational experience can set the table for more scalable growth well into the future (while also potentially leading to better advisor retention [as processes run smoother] and client enthusiasm [if the firm can deliver a consistently excellent client experience]).       

CFP Board Draws Record Exam Turnout, Though Retention Remains A Question 

(Melanie Waddell | ThinkAdvisor) 

Much has been written in recent years about the ‘graying’ of the financial advisor population and the potential for a shortage of advisors as demand for financial advice continues to grow, amidst an expected wave of retirements in the years ahead. Which suggests that tracking the pipeline of aspiring advisors could signal whether the industry will maintain a sufficient headcount into the future.  

The recent administration of the CFP Exam offers a potentially optimistic note on this front, as the organization reported that a record 4,391 candidates sat for the exam (surpassing the previous high of 4,064 candidates in November 2011, a mark that was set in part as candidates rushed to take the exam before the addition of the Capstone requirement and introduction of a revised exam blueprint in 2012), and 2,927 of those candidates passed the exam (a pass rate of 67%, roughly in line with the average pass rate over the past 4 years).  

Notably, exam-takers skewed relatively younger, with 75% under 40 years old and 47% under age 30. Also, the exam saw new records for racially and ethnically diverse candidates (908 in total, or 20.7% of all exam takers) and women candidates (1,240 in total, which comprised 28.2% of all exam takers), signaling a potential shift in growth for two groups that have long been underrepresented in the advisor community (as relative to the demographics of all CFP professionals, barely 10% are reported as racially or ethnically diverse and the number of women has remained stubbornly at 23% for nearly two decades).   

In the end, though, the challenge for CFP Board (and the industry as a whole) is ensuring that candidates and newly minted CFP professionals enter and remain in the industry for the long term (particularly as exam-takers skew increasingly younger, likely representing more recent graduates than experienced advisors looking to add the certification), or today’s exam registration success is tomorrow’s industry retention failure. Which is important, given the historically high wash-out rates for new advisors (particularly for those who get their start in product sales-focused positions where there is an industry incentive to cause a high rate of young advisor attrition). Nevertheless, the heightened interest amongst aspiring advisors in demonstrating expertise through CFP certification could be a boon for advice-centric firms looking to tap into a broader pool of candidates for their next hire!  

Minority Investments In RIAs Shift Towards Smaller Firms

(Leo Almazora | InvestmentNews) 

The past few years have seen a wave of RIA Merger and Acquisition (M&A) activity, including (often private equity-backed) RIA “aggregators” completing full acquisitions of smaller firms. Nonetheless, not all acquisitions are total, with minority investments seeing growth as well, representing a middle ground between maintaining internal ownership and the complete sale of the firm. 

According to data from M&A consulting and advisory firm DeVoe & Company, there were 14 minority transactions in the first quarter, accounting for 15% of total RIA deal activity in the period. This continues an upward trajectory for minority deal volume, which rose from 20 transactions in 2023 to 48 last year. A notable trend within these figures is the growing interest in relatively smaller firms amongst minority investors; while only four minority transactions involved firms with less than $2 billion in Assets Under Management (AUM) in 2023, 20 of 45 total minority transactions in 2025 involved sub-$2 billion firms (and in 2026, 7 of the 14 first-quarter minority transactions did so, already surpassing the total from 2024). Amongst the motivations for these deals, sellers in this range (who are often still founder-led) could be looking to outside capital to address technology and staffing needs as they look to grow further, while investors might see an attractive price point (compared to a full acquisition) and the opportunity to lend their expertise to help the firms scale efficiently (and achieve a strong return in the process). 

In sum, RIA minority transactions aren’t just for the largest firms, as relatively smaller firms looking to tap into the resources outside investors can provide could find willing partners as well. That said, just as in other types of transactions, paying close attention to the deal terms is important, as sellers will want to understand the governance rights and other sources of influence investors will obtain (as these can be powerful, even in a minority transaction!). 

The Best Strategies For Boosting Starting Withdrawal Rates In Retirement 

(Amy Arnott | Morningstar) 

Individuals entering retirement have different motivations for what they want their spending in retirement to look like as well as the legacy interests they want to leave after they pass away. For instance, some retirees might prioritize keeping their spending consistent (i.e., avoiding spending reductions if market performance is poor), others might want to maximize total lifetime spending (even if doing so requires spending adjustments along the way), while still others might prefer to maximize how much money they leave behind. 

Another group of retirees could want to prioritize spending more in the early years of retirement (perhaps to spend more on travel or other activities while they’re still relatively healthy), which can play out in the form of a higher starting withdrawal rate than might be considered under other strategies (which might have to be adjusted over time depending on portfolio performance). Amidst this backdrop, Morningstar tested several retirement income strategies (using forward-looking return and volatility assumptions for a 40% stock 60% bond portfolio to test 1,000 hypothetical return patterns over a 30-year period while seeking a positive portfolio balance in at least 90% of the trials) to determine which could offer the highest starting withdrawal rate for retirees. 

Two strategies tested offered starting safe withdrawal rates of 5.70%. These included a “constant percentage” strategy where the retiree withdrawals a set percentage of their portfolio each year (with an income ‘floor’ of 90% of the first year’s withdrawal amount. While this strategy offers a relatively high initial withdrawal rate, it can come with significant year-to-year spending volatility, as each year’s withdrawal will adjust each year depending on the final portfolio value from the previous year. Another strategy offering a 5.70% initial safe withdrawal rate is an “endowment” method, where the retiree takes out a fixed percentage of assets using a 10-year average portfolio value (rather than the value at the end of the previous year), while also using a ‘floor’ of 90% of the initial withdrawal amount. Though, like the “constant percentage” strategy, there can still be significant spending volatility year-to-year as the percent taken out of the portfolio remains constant. 

A few other strategies tested also offered starting withdrawal rates above 5%. These included traditional Guyton-Klinger “guardrails” (where annual spending amounts are adjusted higher or lower if upper or lower guardrails are hit), probability-based guardrails (where the guardrails are based on hitting certain Monte Carlo probability of success levels), or a “floor and ceiling” method, where a fixed percentage ceiling and floor for annual spending adjustments are set to keep adjustments within a particular range.  

In sum, retirees who want to front-load their spending (and are willing to risk reduced annual withdrawals and a lower asset balance at their deaths) have several potential paths to do so. Which suggests a valuable role for financial advisors in helping clients choose the right solution for their needs and monitor the plan on an ongoing basis to ensure that it is executed correctly (so that their clients can meet their spending goals while maintaining a sustainable path to meet their lifestyle needs throughout retirement). 

Historical 90% Success And Monte Carlo 90% Success Are Not The Same Number 

(Bellavia Research) 

Modern financial planning software allows financial advisors and their clients not only to project what effects certain financial decisions (e.g., changing jobs or retiring at a certain date) will have on a straight-line basis (e.g., fixed return assumptions) but also can offer a ‘probability of success’ based on different inputs and data sources. Two of the most common ways to calculate a ‘probability of success’ are historical simulations and Monte Carlo analysis. While the output of these exercises looks the same (e.g., a 95% probability of success for a particular plan configuration), in reality they are communicating two very different things. 

Historical simulation uses actual historical returns data to test different retirement periods (often 30 years) that actually occurred (with data often going back 100+ years). Using this tool, advisors and their clients can see the percentage of retirement years where the client’s assets would have been sustainable and where they would have been depleted (e.g., a 95% success rate would suggest that the client’s assets would have run out in only the unluckiest few starting retirement dates over the period studied). On the other hand, Monte Carlo analysis generates hundreds or thousands of synthetic return sequences by sampling from a calibrated distribution. Unlike historical simulation, though, Monte Carlo analysis leverages user-input assumptions for returns, the standard deviation of those returns, and other factors. 

While historical simulation and Monte Carlo analysis are distinct tools, they can provide valuable information when used together. For instance, when both largely agree (e.g., a client has a 90%+ chance of success), it could be a strong sign that the client’s plan is robust across both actual return patterns and hypothetical sequences that haven’t occurred yet. A disagreement could be informative as well; for instance, if the chance of success is significantly higher for historical simulation than Monte Carlo, it could mean that the client could be vulnerable to a plausible, though particularly negative, sequence of returns that hadn’t been seen in the historical period (and/or perhaps that the assumptions that went into the Monte Carlo simulation were particularly conservative). 

Ultimately, the key point is that while both tools produce a “probability of success”, it’s important for advisors and their clients to recognize whether they’re using historical simulation or Monte Carlo analysis to understand the true nature of the results they receive (while also being aware of how a “probability of success” framing can be improved, including by understanding the details of ‘failed’ simulations, including when they occur during retirement and the size of the shortfall created).  

When It Comes To Monte Carlo Scenarios, How Many Is Enough? 

(Justin Fitzpatrick and Derek Tharp | Nerd’s Eye View) 

While Monte Carlo analysis can be a useful tool to examine multiple iterations of potential market returns to forecast how often a given plan may be expected to provide sufficient income for the client throughout their life, there is a lot about Monte Carlo simulation that is still being studied. For instance, advisors may wonder if there is any benefit to increasing the number of Monte Carlo scenarios in their analyses to provide a more accurate picture of the range of potential sequences of returns a client might face. 

While financial planning software typically uses 1,000 scenarios, advances in computing make it possible to run 100,000 or even more scenarios within reasonable amounts of time. To examine the potential impact of various numbers of simulated scenarios that could be chosen, the authors tested how consistent Monte Carlo plan results are when run at different scenario counts and iterated these simulations 100 different times. They found that the variation of sustainable real annual retirement income suggested by simulations running 250 versus 100,000 scenarios varies only by about 1.5% for given levels of spending risk. However, the variation is wider at the extreme tails (i.e., 0% and 100% risk), which provides some particular considerations for those who might be aiming for as close to 100% probability of success as possible.  

Altogether, the results of this analysis suggest that the common scenario count levels built into Monte Carlo tools today are likely to be adequate to analyze the risk of different spending levels. Nevertheless, for clients who really want to get to as close as possible to a 100% probability of success could see some benefit from expanding the number of scenarios (though advisors could also explain how lower probabilities of success can still be quite viable).  

The Ins And Outs Of Disclaiming An Inheritance

(Laura Saunders | The Wall Street Journal) 

In many cases, receiving an inheritance can be a bittersweet byproduct of a loved one’s death, providing additional financial flexibility or security to an heir. However, some heirs don’t necessarily need the assets they inherit (and/or might be concerned about the tax implications of the inheritance, particularly if it’s from a traditional IRA that will have Required Minimum Distributions). In these cases, disclaiming all or part of the inheritance can be a strategic tool to pass along the greatest wealth to those who need it the most. 

In legal terms, a disclaimer is a document in which someone renounces an asset they stand to inherit. The disclaimed asset then passes to another her as designated by beneficiary forms or a will. Notably, under Federal law, disclaimers must be made within nine months after death and, importantly, the person disclaiming an asset must not have benefited from it (e.g., by spending the dividends of inherited stock). Those making the disclaimer do have flexibility in terms of what assets and the amount to disclaim (e.g., an older, higher-income individual might hold on to inherited taxable assets that could be subject to a basis step-up in the future but might disclaim traditional IRA assets if they know they will pass to a younger individual in a lower tax bracket and have distribution requirements), though there isn’t the same flexibility for inheritors in naming specific beneficiaries for particular disclaimed assets.  

In sum, disclaimers can be a valuable tool to help a family maximize the impact of a deceased loved one’s assets. Further, disclaimers can be a tool considered by financial advisors working with both clients planning to leave money behind (e.g., by designating contingent beneficiaries in case the primary beneficiaries choose to use a disclaimer) and by clients who are recipients (e.g., by assessing the impact of particular inherited assets on their taxes and/or overall financial plan).  

10 Reasons To Consider Disclaiming An Inheritance 

(Jim Dahle | The White Coat Investor) 

Most people would find it hard to turn down “free” money, whether it’s finding a $20 bill on the sidewalk or getting a match in a company 401(k). However, the decision of whether to keep or disclaim (all or part) of an inheritance can be a trickier matter, involving factors from tax considerations to family dynamics. 

To start, while some inheritances come in the form of liquid assets (e.g., cash or publicly traded securities), some assets can be more challenging to manage (e.g., inheriting a house that would require work to sell). In the latter case, the inheritor might choose to disclaim the asset, particularly if the next in line to receive it is more excited about the proposition (e.g., a member of the younger generation who might be able to move into the house). Disclaimers can also be effective in shielding assets from creditors; for instance, a beneficiary’s current assets might largely be shielded from creditors (e.g., retirement accounts protected by ERISA), but an inheritance could become exposed. In this case, disclaiming the assets could mean that a family member, rather than the creditor receives the proceeds. 

Using a disclaimer can be an effective tax management tool as well. For instance, an inheritor with sufficient assets to put them over the estate tax exemption limit might choose to disclaim assets so that they don’t count towards their estate (notably, these disclaimed assets don’t count towards the gift tax exemption either). Also, disclaimers can be used for managing income tax exposure; for instance, an individual in a high tax bracket might choose to disclaim a traditional IRA and let it pass to a beneficiary in a lower tax bracket to maximize after-tax proceeds from the bequest (of course, this assumes that the original beneficiary doesn’t particularly need the assets). 

In the end, while the original owner of assets might do their best to leave particular assets to heirs in a strategic manner (in terms of who wants a particular asset and/or in the most tax efficient way possible), given that circumstances can change over time, disclaimers can be a valuable tool to help ensure their assets are distributed as effectively as possible. 

The Key Decisions For Spouses Who Inherit A Traditional IRA 

(Denise Appleby | Morningstar) 

For married individuals who have traditional IRAs, it’s common to name their spouse as the primary beneficiary on the account so that they can use it to support their lifestyle needs after the first spouse’s passing. However, the surviving spouse has a few options for what to do with this IRA, with the ‘best’ decision likely depending on a variety of factors, including the deceased spouse’s age, the surviving spouse’s age, the age of the couple’s children, and whether the surviving spouse needs income from the IRA to cover living expenses. 

A first option is for the surviving spouse to move the inherited IRA to their own IRA. This allows the surviving spouse to delay Required Minimum Distributions (RMDs) until their own Required Beginning Date (RBD). Another option is to keep the assets in a beneficiary IRA; in this case the spouse will have to take RMDs (with the amount based on the surviving spouse’s age and single life expectancy) in the year the decedent would have reached their RBD (if they died before their RBD), or in the year after death (based on the longer of the decedent’s remaining single life expectancy or the surviving spouse’s single life expectancy) if the deceased spouse had already reached their RBD. These options can be supportive if the surviving spouse needs to generate income from the inherited traditional IRA to meet their lifestyle needs (though the surviving spouse will likely want to list their children as the beneficiaries of the IRA in either case to ensure it passes to them upon their deaths). 

Couples with children have additional factors to consider as well. For instance, if the surviving spouse doesn’t require the assets from the traditional IRA, they might disclaim the account and allow it to pass to their children (which highlights the value of listing the children as a contingent beneficiaries on the IRA). The children will typically then have 10 years to distribute the inherited IRA (with RMDs in the meantime if the deceased parent died on or after their RBD). Even if the surviving spouse doesn’t disclaim the inherited IRA, the choice of whether to move it to their own IRA or to keep the assets in a beneficiary IRA can have tax implications for their children as well (e.g., if the account is moved to a beneficiary IRA, when the surviving spouse dies, the children will take distributions using the surviving spouse’s remaining single life expectancy, which could be shorter than the 10-year deadline they will otherwise face, perhaps leading to a larger tax burden).  

Ultimately, the key point is that the decision of how to handle a traditional IRA inherited from a deceased spouse can be trickier than it might seem on the surface. Nonetheless, given the options available, financial advisors are well-positioned to help surviving spouses make the best decision that incorporates their spending needs, tax considerations, and their own legacy preferences. 

The Rise Of The Private Concierge And How The Wealthy Use Them

(Brent Crane | The New York Times) 

There is no shortage of minor conveniences in modern life, from trying to get a reservation at a popular restaurant to forgetting a key item when traveling. While many individuals grit their teeth and bear such inconveniences, a number of private concierge services exist to ease these burdens for their (wealthy) clientele. 

At a high level, concierge services “fix problems” for their clients, whether it’s securing tickets to a sold-out game or, in one case, accompanying a client’s beach wardrobe to its final destination when they decided to change plans mid-vacation. These services will also sometimes partner with high-end brands to provide exclusive experiences and items for clients. More broadly, they compete to provide a level of personalization to stand out in the minds of their clients, whether it’s ensuring a hotel room is set up to a client’s specifications or ensuring a favored first course is ready when a client arrives for a restaurant reservation. 

Notably, the cost and exclusivity of such private concierges can vary significantly. At the higher end, such services might cost $50,000-$75,000 per year or more (typically taking on fewer clients), while others have a much lower fee (and still other concierge services come complimentary with certain ultra-high-end credit cards or other memberships). The services themselves generate revenue from both membership fees and commissions through hotel and other travel bookings. 

Altogether, while having significant wealth can buy luxury goods, it can also be used to avoid inconveniences others might have to face themselves. Which, for certain high- and ultra-high-net-worth clients might be worth the costs that such concierge services charge (and could serve as a signal for advisory firms looking to serve this demographic of the level of personalized service and problem-solving such clients seek).     

How Flying On A Private Jet Became The No. 1 Marker Of Real Wealth 

(Gunjan Banerji | The Wall Street Journal) 

The past several years have seen a surge in the number of ultra-wealthy individuals, with the number of billionaires growing more than 50% between 2015 and 2024 (alongside the addition of more than 1,000 millionaires every day on average in 2024). Which, for some, has moved the bar on what ‘luxury’ represents, with private jet travel now representing a key marker of exclusivity (perhaps separating the “top 0.1%” from the ‘mere’ “top 1%”). 

For those who can afford it, private jet travel offers flexibility (in terms of travel times and destinations) and comfort (so long security lines and center seats, hello car service directly to the plane and custom menus). Of course, doing so comes at a cost, though interested individuals have many ways to access it. At the high end, a particularly wealthy individual might purchase their own jet, whether in cash or via a loan. More flexible alternatives (for those who don’t want to make such an outlay or who don’t want to deal with upkeep of the plane) include services that allow clients to book entire planes for specific routes or seats on charter flights (though paying for such exclusivity can still add up to hundreds of thousands of dollars per year). 

In sum, private aviation and available services have taken off in recent years amidst a growing number of ultra-wealthy individuals in the United States and beyond. Which suggests that advisory firms serving this client group could expect to hear more questions from clients regarding this service (and potentially stand out from competitors by gaining expertise in the various options and financing mechanisms available to them!).  

Concierge Medicine Smooths Access, Though Benefits Are Uncertain 

(Elizabeth O’Brien | Barron’s) 

For many, getting an appointment with a doctor (particularly for specialists) can involve a multi-week (or even multi-month) wait. And when the appointment does arrive, doctors can seem hurried as they try to see as many patients as possible in a given day. 

Amidst these challenges, a range of concierge medicine services have emerged that offer their clients (who typically pay an annual subscription fee for access) speedier, more personalized service, whether it’s having a primary care doctor’s cell phone number for urgent questions or getting appointments sooner with specialists. Concierge medicine practices also can offer members a wide range of wellness services (e.g., nutritionists on call) and often have their patients undertake a wider range of tests that regular practices might not prescribe (and that insurance plans might not cover). Like other luxury offerings, the services and costs of concierge medical practices can vary, with more exclusive providers sharply limiting their patient counts and others (often offered by hospital systems) offering somewhat less-exclusive benefits at a lower price point (with additional costs for services provided that aren’t covered by medical insurance).  

While such concierge medicine offerings no doubt can provide greater convenience to members, research on the actual health benefits of being part of a concierge service is less clear. Part of the issue is a measurement problem; because such services typically are the purview of wealthy individuals and there is a positive correlation between wealth and longevity, it can be challenging to untangle any boosts to lifespan that specifically come from working with a concierge medical practice. Also, some of the extra testing often performed by such practices (which include “full body scans”) could be counterproductive for some patients if they issue false positives that can result in extra testing and/or increased anxiety for the patient (though this may be worth it for some patients if the supplementary tests uncover a serious problem that might not have been detected otherwise). 

Ultimately, the key point is that while wealth might not be able to guarantee good health, it can pay to smooth the experience of receiving health care. Which might be worth it for clients who want to use their assets to “buy time”, whether in spending less time managing their health care or, perhaps, attempting to extend their life spans through a more personalized medical experience. 

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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 "WealthTech Today" blog.