Weekend Reading For Financial Planners (December 27–28)

RIA Acquirers Seeking New Deals With Good Culture Fits In 2026: Survey

(Peter Saalfield | Citywire RIA)

With a large number of financial advisory firm founders nearing (or already at) retirement age, succession planning has been a hot industry topic in recent years. While some firms are pursuing an internal succession (handing ownership over to the next generations within the firm), others are pursuing external deals, with plenty of potential acquirers (who are often fueled by private equity capital).

Amidst this backdrop a survey from Mergers & Acquisitions (M&A) consultancy DeVoe & Company of more than 100 RIA decision-makers at firms with at least $100 million in assets under management finds that 54% of respondents expect deal volume to increase in 2026 (with only 2% expecting it to slow down). For those leaders looking to make acquisitions, 69% cited cultural fit as the top characteristic they seek in a potential target (with talent coming in second at 15%), perhaps recognizing that successfully integrating an acquired firm is key to the success of a deal (in terms of client and employee retention, among other factors).

Overall, 53% of respondents cited organic growth as their top worry and many firms appear to be looking to deals to spur overall growth, with 79% of buyers and 49% of sellers listing growth as their primary motivation for making a deal. Part of the interest in external deals also appears to be challenges in selling the firm to internal successors, with only 22% of respondents saying their chosen successors can afford to buy them out (perhaps influenced by rising valuations resulting from increased demand by serial acquirers).

In sum, the rapid pace of RIA M&A activity seen during the past couple years appears poised to continue into 2026, with relatively larger RIAs showing continued appetite for additional deals (where the cultural fit makes sense) and selling firm owners seeking an external buyer, whether because of a lack of internal successor (though founders who start the succession planning process well in advance of retirement might find greater success on this path) or a desire to link up with a larger firm with established infrastructure to spur growth in the years ahead.

SEC Warns Marketing Rule Missteps Still Plague RIAs

(Tracey Longo | Financial Advisor)

For decades, RIAs were not allowed to use any type of client testimonials in their marketing, under the rationale that advisors would simply 'cherry-pick' the clients who had achieved the best results to solicit for testimonials, resulting in a skewed impression of what clients were actually likely to experience in working with the advisor. That changed in 2020, however, when the SEC completely revised its original Marketing Rule to 'modernize' it in accordance with the rise of testimonial marketing in other industries through online review sites like Yelp and Google. The new Rule 206(4)-1, which became final in 2021 and enforceable beginning in 2022, permits testimonials in RIA marketing.

Since the new marketing rule was implemented, however, the SEC has been active in enforcing its provisions, citing (and sometimes fining) firms for a wide range of violations. In a risk alert issued this month, the most serious violations involve testimonials and endorsements that lack clear, timely disclosures, according to compliance firm ACA Group. For instance, SEC examiners have repeatedly found that firms failed to disclose whether a promoter was a current client, whether compensation was paid for the promotion, or whether conflicts of interest existed. Other marketing rule violations involved the misclassification of referral arrangements, for example by failing to recognize that small or de minimis payments to people promoting their firms still count as compensation under the rule or by not having written agreements with these people at all. Also, some firms have been found to use third-party ratings and rankings in their marketing without reviewing the underlying questionnaires or survey methodologies.

ACA group suggested several steps advisors could take that could help them remain in compliance with the marketing rule, including making sure disclosures appear at the moment an advertisement is disseminated, using same-size, same-weight font for the disclosures as they do a testimonial or rating, updating written agreements with promoters and documenting oversight, and verifying rating methodologies and disclosing all compensation paid.

Ultimately, the key point is that while the SEC marketing rule opened new opportunities for RIAs to expand the scope of their marketing, with it came requirements to do so in a way that helps consumers understand the nature of these endorsements and who is making them (helping them understand how much weight should be given to them when evaluating a particular firm). Which suggests that compliance with the marketing rule isn't just a matter of avoiding citations during an upcoming examination, but also a way to demonstrate to prospective clients the firm's transparency, even before the first in-person interaction.

SEC Opens Floodgates For Dual-Share-Class ETFs As RIAs, BDs Consider Responsibilities

(Leo Almazora | InvestmentNews)

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

After the SEC in late September signaled that it would grant exemptive relief to Dimensional Fund Advisors' application to offer dual-share-class funds, the regulator last week did the same for 30 more asset managers, including BlackRock, JPMorgan, PIMCO, State Street, and Charles Schwab, among others. According to survey data from FUSE Research, "exchange privilege" (which allows investors to switch to the ETF version of a mutual fund they hold [giving them the tax efficiency benefits of ETFs, including avoiding capital gains distributions that are more common amongst mutual funds] without having to sell the mutual fund [allowing them to avoid realizing any embedded capital gains]) appears to be the biggest draw of dual-share-class ETFs, with 83% of advisor respondents indicating they would welcome this opportunity for clients' qualified accounts and 80% indicating the same for nonqualified accounts.

For RIAs, the introduction of dual-share-class ETFs could provide an opportunity to potentially provide clients with tax savings when converting from a mutual fund to its linked ETF (as well as being able to offer the different wrappers for the same fund strategy if a client has a preference for one or the other). For broker-dealers, though (particularly those relying on commission revenue from mutual funds), the dual-share-class ETFs could raise thorny questions under Regulation Best Interest (Reg BI), as they might need to justify keeping a client in a higher-fee mutual fund share class rather than converting to a potentially lower-cost and more tax-efficient ETF share class (with research firm Cerulli Associates estimating that high rates of conversion to ETF share classes could put up to $30 billion of annual 12b-1 and sub-TA revenues at risk for the industry (perhaps leading them to explore new revenue-sharing models that could erode the ETF's lower costs?).

In the end, while the introduction of dual-share-class funds could represent a cost-savings opportunity for advisors and their clients (particularly as more asset managers are approved and begin to roll out more funds), it may take time for some advisors to recognize this potential opportunity, whether because of the relatively new nature of the structure (at least beyond Vanguard's funds) or (for those in the broker-dealer channel), the balancing act between Reg BI responsibilities and revenue-generating opportunities?

What's A Safe Withdrawal Rate For 2026?

(Amy Arnott, Christine Benz, and Jason Kephart | Morningstar)

One way financial advisors offer value for their clients is in determining how much they can afford to spend annually in retirement. Given the importance of this calculation, a wide range of strategies have emerged to match different retirees' retirement income preferences (e.g., certainty versus flexibility) and legacy goals.

One of the simplest approaches to determining how much a retiree might draw is to select a fixed percentage of their assets to withdraw in their first year of retirement and then adjust this figure for inflation each year (the well-known "4% Rule" is an example of this method). According to research from Morningstar, an individual retiring at the beginning of 2026 could start with a 3.9% withdrawal rate under this approach, assuming a 90% probability of having funds remaining at the end of an assumed 30-year retirement period and a portfolio equity weighting of 30% to 50% (this estimate incorporates forward-looking asset-class return and inflation assumptions and is up from the 3.7% withdrawal rate estimated for individuals retiring at the beginning of 2025). Notably, the safe withdrawal rate varies by time horizon (e.g., a similar safe withdrawal rate for a 20-year retirement is 5.3% but 3.2% for 40 years) and equity weighting (with the researchers finding a weighting around 40%-50% offering the highest safe withdrawal rates).

However, the researchers highlight that retirees could start with a higher safe withdrawal rate if they're willing to incorporate flexibility in their spending. For instance, a "constant percentage" approach by which an individual withdraws the same percentage of their portfolio each year would allow for 5.7% withdrawals every year, while a "guardrails" approach (by which spending is adjusted upward or downward based when certain portfolio size "guardrails" are hit over time) offers a 5.2% starting withdrawal rate. Of course, these approaches come with a tradeoff of potential declines in annual spending if the market were to decline (which might be particularly painful for clients with large, fixed expenses). Though the researchers note that retirees can gain additional flexibility by boosting their sources of non-portfolio income (perhaps to the point that it covers most or all of their 'core' expenses), for example by delaying Social Security benefits (particularly if they have earned income to cover the delay period).

Ultimately, the key point is that with a range of available withdrawal rate methods, advisors can support their clients by identifying an approach that matches their risk tolerance and spending preferences (e.g., how flexible they can be with their spending). Though, at a more basic level, perhaps an even more significant benefit is the ability of an advisor to work with a client to adjust their financial plan over time, which adds greater flexibility and adaptability than a one-time withdrawal rate election.

Why Withdrawal Rate Flexibility Could Be More Painful Than Expected

(Early Retirement Now)

One of the critiques of fixed-withdrawal-rate strategies such as the "4% Rule" is that they potentially lead to lower spending over the course of a retirement compared to more flexible approaches that typically allow for higher initial withdrawal rates and the potential for future annual spending increases if market performance is strong.

The downside to flexible approaches, though, is that they require a retiree to be able to handle downward changes to their spending if their portfolio balance falls to or beyond prescribed levels. And while "flexibility' sounds acceptable in theory, some retirees might find that the flexibility required to implement such strategies might be more than they can stomach, particularly if they are unlucky enough to experience an extended bear market. For instance, if it's assumed that 4% represents a "safe" initial withdrawal rate (adjusted for inflation annually), an extended market downturn could mean that spending in a flexible model might have to fall well below 4% of the initial portfolio amount (to make up for the initial withdrawals that exceeded 4% of the initial balance).

In addition to flexibility regarding the 'depth' of an annual spending decline (e.g., moving from a $50,000 annual portfolio withdrawal to a $40,000 withdrawal in a given year due to a market downturn), a second element of 'pain' for clients is the length of the drawdown. Because while a client might be able to stomach a $10,000 income reduction for a single year, having reduced income for several consecutive years (which could result from an extended, deep bear market) could be much more painful.

In sum, while flexible withdrawal rate approaches can be attractive to clients who want the option of spending more earlier on in retirement (and who want to be able to adjust spending upward if they experience a strong sequence of returns), financial advisors implementing these approaches can help these clients better understand the tradeoffs involved (and avoid negative surprises) by calculating the potential for downward revisions to annual withdrawals, both in terms of the potential dollar amount of the reduced income and how long it might persist.

The Extraordinary Upside Potential Of Sequence Of Return Risk In Retirement

(Nerd's Eye View)

One of the key challenges of determining "reasonable" spending in retirement is that, even if the advisor is right about the anticipated long-term returns of the retirement portfolio, there's a risk that ongoing withdrawals on top of a series of early bad returns will cause the portfolio to be fully depleted before the good returns finally arrive to average out in the long run. As a result, retirees must generally spend less than what expected returns alone would otherwise predict is affordable, to defend against this "sequence of return risk".

Yet the caveat is that while a bad sequence of returns coupled with ongoing withdrawals can catastrophically deplete a portfolio too quickly, a good sequence of returns can quickly compound the portfolio so far ahead that substantial excess wealth accrues instead. In fact, because of how long-term returns compound to the upside, favorable sequences of returns actually produce far more excess wealth than unfavorable sequences risk to the downside. For instance, taking a 4% initial withdrawal rate has an equal (10%) likelihood of leaving all the retiree's principal left over at the end of retirement… or leaving 6X the starting account balance remaining instead!

Which means not only is it important to give at least some consideration to the potential and upside "risk" of getting a favorable sequence of returns, but the asymmetric nature of sequence risk to the upside suggests that simply spending conservatively and adjusting later if a "good" surprise occurs may be too likely to leave dramatic levels of unspent wealth that could have been enjoyed earlier. After all, at a 4% initial withdrawal rate, the odds of nearly depleting the portfolio are equal to the odds of growing it by more than 800%(!), and even at a 5% withdrawal rate, the odds of depleting the portfolio early are equal to the odds of tripling the retiree's starting principal on top of taking an initial withdrawal rate of 5% with 30 years of annual inflation adjustments.

With this in mind, an alternative is to plan, in advance, for retirement spending strategies to be more dynamic, for instance by having a ratcheting plan in place to lift a low initial spending rate higher if the sequence is favorable (or at least, is not unfavorable), and for those who are willing to be more flexible in their retirement spending, to set guardrails in advance to know both when to cut spending in a bad sequence, and when to lift it higher in a more favorable one.

The bottom line, though, is simply to recognize that sequence of return risk truly cuts both ways, creating both the risk of depleting a portfolio too early with a bad sequence (even if returns do average out in the long run), but also the risk of the retiree waiting too long to fully spend and failing to enjoy the assets and income that turned out to be available because a favorable sequence of returns occurred instead!

Capacity: The Key For Building A Sustainable Advisory Practice

(Angie Herbers | Citywire RIA)

There is no shortage of productivity metrics financial advisory firms can track and benchmark themselves against other firms. However, many of these metrics (e.g., revenue per advisor or revenue per client), while helpful, give a snapshot of what the firm looks like today and doesn't necessarily provide information about whether the firm will be able to maintain its pace or grow further in the years ahead.

With this in mind, Herbers considers a firm's capacity (i.e., the future potential of its employees) as the key to being able to sustain and expand its service level over time. For instance, an advisor generating $1 million of revenue might appear to be highly productive, but if they are working 60 hours a week and aren't providing sufficient support for their team members, they might be limited in how they can grow their business in the future (and might have the added burden of staff turnover if they don't feel like they have upward mobility or sufficient training). On the other hand, an advisor generating $500,000 in revenue but who works reasonable hours and is able to invest time in the hiring process and in training employees is likely to have significantly more capacity for growth going forward (and perhaps a reduced chance of burning out).

In the end, while it can be important for a firm to focus on point-in-time productivity metrics (given that the bills need to be paid today!), taking a step back to consider team capacity (e.g., by evaluating its talent pipeline, including team members' ability to take on more clients and/or responsibility while maintaining high service levels) and making adjustments where necessary (e.g., perhaps hiring additional staff before hitting a capacity 'wall') could help it build on its level of success for years to come!

Addressing The Complexity-Capacity Gap To Achieve Sustainable Growth

(Ray Sclafani | ClientWise)

When a financial planning firm opens, its founder might be willing to take on just about any willing client in order to generate revenue and 'keep the lights on'). Over time (particularly as they find themselves stretched to their capacity limit serving a larger number of clients with different needs) they might decide to narrow down the types of clients they work with, perhaps by instituting a minimum asset or fee level to ensure each new client is generating at least a certain level of revenue.

Even with a minimum fee level, though, advisors can find themselves stretched to their limits, particularly if they don't have an ideal client avatar (in which case they might be serving clients with very different planning needs) or if they try to move 'upmarket' and work with higher-net-worth clients with more complex planning needs. When each client is their own "one-of-a-kind" project, team capacity can become particularly stretched.

With this in mind, growing firms can consider how they might structure themselves to handle future growth in the number and/or complexity of their clients. For instance, multi-advisor teams could identify the strengths and expertise of particular advisors and planning specialists and align them with particular client needs (improving efficiency compared to each advisor serving a wider range of client types). In addition, a firm could evaluate its pricing model and consider changes that reflect the varying complexity of different client types (e.g., instituting scope-based pricing with clear service tiers to more accurately link client complexity [and the time it will take to serve them] with the fees they pay). And at a more basic level, firms could take a step back to evaluate its current ideal client profile and its relative success in sticking to it to see if capacity might be opened by focusing on attracting more ideal-fit clients.

Ultimately, the key point is that bringing in higher-net-worth clients doesn't necessarily mean greater profitability for a firm, as serving these clients well might create excessive demand on team time that strains a firm's capacity. Nonetheless, by taking a proactive approach to moving 'upmarket' (e.g., by focusing on an ideal client profile and ensuring team members have the capacity and skills to meet it, while charging fees that reflect increased client complexity), firms can continue to thrive financially and grow sustainably.

Rethinking Advisor Capacity To Optimize An Advisory Practice For Growth

(RFG Advisory)

When it comes to building an advisory practice, it can be tempting to think 'more' is better (whether in terms of clients, revenue, or staff). However, if a firm doesn't have the infrastructure to handle this growth, its founder and team members could find themselves struggling (whether in terms of time and/or financially) to keep up with a level of growth that might be pulling them in many different directions.

With this in mind, advisor coach Stephanie Bogan offers several ideas for how advisors can ensure they have sufficient capacity for their next growth stage. To start, an advisor might think that the solution to a capacity problem is to hire a new employee; however, doing so before evaluating current processes could create an additional time and financial burden (e.g., hiring, training, and paying the new employee) while maintaining potential inefficiencies. Which suggests that advisors might first look at their current processes to determine whether their time is spent on the highest-value activities (e.g., meeting with current and prospective clients) and perhaps identify areas that could be ripe for outsourcing, a technological solution, or outright elimination to free up time for higher-impact tasks (though, once efficiencies are gained, some firms might decide to hire to build their client-facing capacity). In addition, taking a look at the firm's client base could identify clients that are taking advisor and staff time that isn't commensurate with the fees they're paying (which could lead a firm to shift certain clients to more junior advisors or segment client service levels).

In sum, the first step to expanding firm capacity isn't necessarily adding to staff headcount or other firm infrastructure. Rather, by performing an audit on how advisors are spending their time, evaluating potential ways to reduce time spent on lower-value tasks, and reconsidering client service models, firms can set a solid base from which to grow sustainably in the years ahead.

How Unlimited Free Stuff From Amazon Almost Ruined My Retirement

(Mr. Money Mustache)

Consumers love to purchase items on sale, but perhaps the only thing that's better is to get an item for free. However, even if an good or service doesn't cost money in dollar terms it's still possible that it could be costly in terms of the time and attention required to get it.

In the author's case, the temptations of the Amazon Vine program (through which consumers can get selected items for free [though they might owe taxes on at least a portion of the value of the goods they receive] in exchange for agreeing to write reviews on at least 80% of them). While he received several items that he would have bought anyway (as well as some that ended up just taking up space), the time it took to peruse the available items and eventually photograph and review them ended up being a fairly significant burden, particularly given that he isn't financially strapped. The process almost became addictive, as he was incentivized to keep checking on the website to see if any new and exciting items had popped up.

This is perhaps an extreme example of the time-money tradeoff that both advisors (e.g., in spending time themselves on marketing versus paying someone to do it for them) and clients (e.g., the ability to 'buy' time in retirement to spend on more enjoyable activities) face, but it shows that when something is advertised as being 'free' there might actually be a (significant) cost involved (in terms of time, attention, or physical/mental space)!

How To Recognize And Address "Lifestyle Creep"

(Joshua White | The White Coat Investor)

While some financial advisors might find that they have clients who are reluctant to spend more money (even though they could afford to), on the other end of the spectrum are clients who spend in an unsustainable way, whether spending more than they earn during their working years or taking portfolio withdrawals at an unsustainable pace in retirement.

In the middle of this spectrum, though, is the concept of "lifestyle creep", where an individual's spending rises alongside their income. While a certain increase in lifestyle spending over the course of one's career is natural (as a college-era ramen noodle diet might not be good for one's health), increases in spending both limit the amount an individual can save for retirement (or other goals) and increase the size of portfolio needed to support their lifestyle in retirement (given that it could be challenging to 'downsize' one's lifestyle after being used to a certain level for many years).

One way to assess the amount of lifestyle creep occurring in one's life is to conduct a "lifestyle creep audit", by analyzing what big purchases or (costly) lifestyle changes have occurred in one's life during the past few years and then assessing which changes had a significant impact on overall wellbeing and which did not. For instance, an individual might find that they've been spending more on vacations (which brought them great happiness by exploring new places with loved ones) but also on a new car (which created an initial surge of excitement but has now blended into day-to-day life). This exercise can help identify areas for "intentional" lifestyle creep (i.e., continuing to spend more on the areas that bring significantly greater wellbeing) and those for "reverse" lifestyle creep (e.g., cutting back on areas where increased spending didn't bring as much lasting joy), ultimately better aligning spending (particularly on big-ticket budget items) with what an individual values the most.

Ultimately, the key point is that while lifestyle spending is likely to naturally increase over time as one's income rises, taking an intentional approach to the areas where spending increases the most (without necessarily nickel-and-diming every purchase, which could come at the cost of greater stress) could allow a client (or an advisor themselves?) to increase their savings rate and perhaps 'buy' themselves more time to enjoy their lives (and purchases) now and in the future.

Your Subscriptions Are Holding You Captive. Here's How To Escape.

(Nicole Nguyen | The Wall Street Journal)

When it comes to managing spending, a common piece of advice is to focus on "big-ticket" items such as spending on a house or car. Nevertheless, smaller expenses can add up over time, particularly when it comes to subscription charges that have become ubiquitous in modern society.

Businesses across industries (including the financial advice industry) are increasingly recognizing the power of recurring revenue, by which consumers pay a regular charge until they cancel (offering an advantage over a one-time purchase, where the company has to find a new customer each time or convince a previous customer to return). Technology services in particular have adopted the subscription model, not only for standalone offerings (e.g., music or video streaming platforms) but also ongoing fees to use particular hardware devices. Further, some companies have made it increasingly difficult to cancel these subscriptions (involving many more steps than it takes to subscribe in the first place) and (amidst attempted pushback) a Federal appeals court recently struck down a proposed "click to cancel" rule that would have required simple cancellation mechanisms and consumer consent to convert free trials to paid memberships.

Given the potential for subscriptions to add up to thousands of dollars per month for consumers, conducting a subscription 'audit' (e.g., by analyzing bank and credit card statements as well as subscriptions linked to phone accounts) could help identify certain subscriptions that are unwanted or duplicative (e.g., having subscriptions to multiple music streaming services). Another strategy to reduce subscription costs is to cancel a subscription immediately after subscribing (as most will let the service run through its expiration date), turning an 'opt out' model (where action is needed to prevent a subscription from renewing) to one that is 'opt in'. Artificial Intelligence tools can also come in handy for managing subscriptions, for example by uploading screenshots or PDFs of subscription statements and having the tool create a chart of the different services, charges, and renewal dates.

In the end, while individual subscriptions might not be make-or-break budget items for many individuals, taking a bit of time to understand the full extent of one's subscriptions and taking steps to ensure only the most valuable are maintained could both free up cash flow and reduce future renewal tracking requirements!

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

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