Weekend Reading For Financial Planners (June 7–8)

SEC-Registered RIAs, As Well As Their Assets And Clients, All Hit Record-High Numbers in 2024: Report

(Sam Bojarski | Citywire RIA)

Historically, broker-dealers, and large wirehouses in particular, have led the way in terms of advisor headcount and Assets Under Management (AUM). Nonetheless, recent years have seen a shift toward the RIA model, both among advisors (as brokers break away to start their own independent firms and aspiring advisors seek positions that don't rely on an 'eat what you kill' approach) and consumers (who might be attracted to the differentiated service proposition they can experience working with an RIA that isn't manufacturing its own financial services products for sale).

According to the latest edition of an annual report by the Investment Adviser Association and compliance firm COMPLY, SEC-registered RIAs saw growth on several levels in 2024, with the net number of RIAs increasing by 474 to 15,870 (of note, the number of RIAs has risen each year for more than a decade, while the numbers of broker-dealers have been shrinking during the same period), the assets managed by RIAs rising to $144.6 trillion from $128.4 trillion in 2023 (buoyed in part by strong equity market performance during the year), the total number of clients served by RIAs growing to 68.4 million from 64.1 million, and the number of employees at RIAs reaching 1.03 million (up by about 26,000 employees from the previous year). According to the report, most RIAs remain relatively small businesses with 92.7% having 100 or fewer employees (with firms focused on serving individuals as clients averaging 8 employees and $393 in assets under management).

The study also looked at state-registered RIAs, which totaled 16,046 in 2024, a 1.6% decline from 2023, which the report attributed in part to firms transferring their registration to the SEC amidst strong regulatory performance (as firms typically have to register with the SEC once they hit $100 million of regulatory assets under management). Compared to SEC-registered RIAs (many of which solely manage assets), state-registered firms were more likely to offer financial planning services, working with 273,000 financial planning clients. State-registered firms averaged 2 non-clerical employees, 49 clients, and $25 million in assets under management.

Altogether, the study indicates that while the largest RIAs tend to dominate in terms of total AUM (with almost 93% of client assets being managed at firms with more than $5 billion in AUM), the industry is robust across the size spectrum, with both smaller and mid-sized firms seeing growth (often pushing them into higher size brackets and/or from state to SEC registration) and remains attractive to new entrants, whether those moving over from other models or totally new firms. Nonetheless, given that the equity market tailwinds experienced in 2024 boosted RIA performance, a focus on organic growth (i.e., winning new clients and/or managing more of current clients' assets), perhaps by showing the unique value a firm has to offer, would likely become more important in future leaner times for markets (and could be particularly important for relatively smaller firms that might not have the marketing budgets to compete with the largest RIAs?).

ETFs Remain Most Commonly Used Investment Vehicle Among Advisors, Alts Gaining Momentum: FPA Study

(Elaine Misonzhnik | Wealth Management)

One of the ways financial advisors can add value is by leveraging their familiarity with a wide variety of investment vehicles to construct portfolios that best meet their clients' objectives. At the same time, the investment product landscape continually evolves, often leading advisors to shift their use of different products over time as the economic environment, product structures, and expenses change.

According to a survey of 195 financial advisors by the Financial Planning Association and the Journal of Financial Planning, ETFs remain the most commonly used product (by 93.3% of respondents) and also the product that advisors plan to increase their use of the most in the coming year (with 63.6% of respondents reporting that they plan to increase their use of ETFs and only 0.8% indicating they planned to decrease their use of them). The gain amongst ETFs appears to be, in part, at the cost of mutual funds; while mutual funds have a 70.2% adoption rate, 29.0% of respondents said they planned to decrease their use of this vehicle (compared to 18.9% that planned to increase their use of them). In addition to ETFs and mutual funds, other commonly used products and vehicles included cash and equivalents (by 82.1% of respondents), individual stocks (60.5%), and individual bonds (51.5%), followed by separately managed accounts (43.3%) and fixed annuities (38.1%). While used by a smaller number of advisors, several 'alternative' investment types saw significant percentage gains in their use in 2025, including options (up 98.4% to 17.2% of advisors in 2025), private debt (up 55.2% to 19.4% of advisors), hedge funds (up 55.2% to 6.7% of advisors), and precious metals (up 46.7% to 12.7% of advisors).

In sum, while ETFs remain the most popular investment product for financial advisors (likely serving as the building block of many client portfolios), advisors appear to be using a wide range of investment products and vehicles with their clients – adding value for clients who might only otherwise consider a limited number of asset classes (and perhaps offering an opportunity for advisors who can gain deep knowledge in products or vehicles that could be particularly useful for their ideal target client!).

While Human Advisors Thrive, Big Brokerages Are Ditching Their Robo-Advisors

(Sean Allocca | The Daily Upside)

The arrival of robo-advisors into the financial technology landscape more than a decade ago led many to believe that the combination of (relatively) low fees and digital presence offered by robos would entice many consumers to eschew human advisors and turn to these automated tools under an "if you build it, they will come" approach. The perceived potential of robo-advisor technology led to the creation of both robo-centric firms (e.g., Betterment and Wealthfront) as well as robo-advisor arms of some of the largest brokerage firms, which saw a potential opportunity to attract smaller clients and be able to serve them profitably (and perhaps someday upsell them higher-cost offerings, e.g., comprehensive wealth management services, as their accounts grew over time).

However, several large recently abandoned their robo-advisor experiments, with UBS, Goldman Sachs, and JPMorgan all abandoning their automated investment services over the past several months. Given that the robo-advisor services tended to come with thin margins (given their relatively low minimums coupled with low advisory fees on those small account balances), success for these firms largely depended on being able to cross-sell robo-advisor clients higher margin products, especially given the high acquisition costs advisory firms face to get any client (small or high balance) in the first place. The problem, though, appears to be that such clients are often "low engagement" (which is likely to be expected given that they sought out an automated, low-cost asset allocation solution in the first place!) and turned out to be less likely to be interested in pricier offerings. Combined with competition from digital native platforms (e.g., Betterment) as well as fee-for-service models that allow a wider range of individuals on the wealth spectrum to access human-provided advice, these brokerages seem to have decided that their robo-advisor efforts were unlikely to bear fruit and that even with their existing size as national banks and brokerage firms, there weren't enough existing clients to cross-sell to earn enough in low fees on small accounts to make the offering worthwhile on its own.

In the end, while several robo-advisor services remain on the market, dire predictions from a decade ago that robo-advisors could significantly eat into the business of human advisors hasn't come to pass, perhaps in part due to the value that human advisors can provide that robo-advisors can't (e.g., in developing a relationship of trust with clients and offering personalized advice on a comprehensive range of planning topics).  And while Artificial Intelligence (AI) tools have emerged as the latest 'threat' to advisors, their potential ability to accurately analyze clients' complex financial situations (and, ultimately, gain clients' trust) remains to be seen, suggesting that human advisors are well-positioned to continue to thrive going forward (perhaps by using AI as a partner rather than merely seeing it as a competitor?). Because in the end, it's really not about the cost to service a client's investment account – which financial advisors themselves can largely automate with technology as well – it's the cost to find and build a trusted relationship with a (lifelong) client.

My Baptism By FIRE: Lessons On Financial Independence

(Christine Benz | Morningstar)

When it comes to considering 'early' retirement, many individuals might think about retiring in their late 50s or early 60s. But for followers of the Financial Independence Retire Early (FIRE) movement, retirement can come much sooner, perhaps in their 30s or early 40s. Benz (who is not a FIRE adherent) recently attended a FIRE-related event, coming away with several takeaways that advisors might apply with clients in their practice (whether they are pursuing early retirement or not).

To start, she found that the concept of "financial independence" can mean different things to different people. For instance, while some might view independence as the ability to permanently stop work at any time (even if it means living on a relatively modest budget), others might view the concept more in terms of flexibility, whether in terms of being able to take a lower-paying job that they might enjoy more or to take regular breaks from work. In addition, while many FIRE followers (particularly those emphasizing the "RE") are seeking to leave unsatisfying (though often high-paying) careers (even if it means staying in the position long enough to amass sufficient assets to be able to retire early), others have seen the value of considering a career change to be able to work in a more sustainable and meaningful manner. On the other end of the spectrum, some individuals in their 50s and 60s might continue to work at a job they don't like even though they've built up a sizeable portfolio because of a vague sense of not having 'enough' (which could present an opportunity for a financial advisor to show them what their spending could look like in retirement even if they left their unsatisfying job sooner). Finally, she found that FIRE adherents tended to have significant flexibility when it comes to their spending, which could prove valuable both for those who intend to retire early (given uncertainties about future investment returns and inflation rates, which could threaten the sustainability of an early retirement plan) and those who are doing so at a 'traditional' retirement age (who could potentially benefit from more flexible retirement income strategies that could allow them to spend more initially if they are willing to risk potential income cuts in the future).

Ultimately, the key point is that while 'classic' FIRE might have a more limited following, the goal of achieving flexibility during one's career and in retirement is likely shared by many clients. Which can allow financial advisors to add value for them by opening their eyes to potential opportunities (from sabbaticals to the option to change companies or careers) and showing them how they can position themselves financially to achieve one or more of these goals!

What FIRE Got Right And Wrong About Investing

(Ally Jane Ayers | Money Changes Everything)

The FIRE movement is often polarizing, with supporters pointing to their ability to free themselves from lackluster jobs and detractors citing the financial risks (very) early retirees take on and the (often) spartan lifestyles they live. Amidst this discussion, Ayers (who notes that she was a "hardcore devotee" of FIRE from 2017-2019, with "FI" becoming a part of her advisory firm's name) finds that there are aspects of personal finance and investing that the FIRE movement gets 'right' (and could prove valuable to a wide range of clients) and areas where it might lead followers astray.

On the positive side, FIRE emphasizes the value of compound interest and how investing early in one's career can lead to sizeable nest eggs down the line. In addition, FIRE followers often take a relatively simple, low-cost approach to investing, preferring index funds to more complex (and expensive) investment vehicles and strategies (an investing style that many financial advisors follow as well). Also, given that the heart of FIRE is about reclaiming one's time, it encourages individuals to put spending decisions into perspective, both in terms of large purchases (e.g., deciding whether buying an expensive new car every few years is worth it if it means having to work longer before retiring) and the value of being more intentional about spending in general.

On the flip side, some FIRE followers' focus on controlling spending can sometimes be limiting, particularly if it leads an individual to decline invitations (e.g., going to a friend's destination wedding) or experiences that could make their lives and relationships richer (even if it means being able to save a little less in a given month). Similarly, a constant focus on spending could lead to miserliness and strained relationships with partners and friends if every decision is made with money in mind (not to mention the added stress [the opposite of freedom?] that comes from counting every penny on a regular basis). Also, in the financial planning context, the FIRE movement's reliance on rules of thumb (e.g., the "4% Rule", which was developed for those retiring at 'traditional' age rather than a potentially 40+ year retirement) could lead some followers astray (e.g., depleting their assets, perhaps due to a poor sequence of returns). Also, FIRE adherents (and bloggers) often advocate for tax planning strategies (e.g., backdoor Roth IRAs) that might seem relatively simple on the surface but can sometimes be difficult to execute properly on one's own (which could lead to issues with the IRS down the line).

In sum, while the FIRE movement has opened many individuals' eyes to the possibilities of prioritizing flexibility with one's (limited) time, taking it to an extreme could counterproductively lead to a less fulfilling (and financially risky) life. Which perhaps gives financial advisors the opportunity for financial advisors to introduce some of the 'best' FIRE concepts to potentially interested clients while helping them implement sustainable, properly executed financial and tax-planning strategies to help them achieve their financial independence goals.

3 Types Of Retirement And Their Very Different Savings Strategies

(Nerd's Eye View)

The 'traditional' approach to retirement is relatively straightforward: save and invest as much as you can, for as long as you can, starting as early as you can, to accumulate enough retirement savings that you no longer need to work, and instead can enjoy a life of leisure. For those who struggle to save, Social Security provides some retirement safety net, and for everyone else, the more and faster you save, the earlier you can retire and the more leisure time there may be. The problem, however, is that some retirement research finds that fewer and fewer people actually want a retirement of all leisure and no work. Instead, whether it's part-time work, entrepreneurialism, an encore career, or some other path, "retirement" is less and less about not working at all, and more and more about finding a different kind of engagement (which may still involve a non-trivial amount of employment income).

The significance of these changes is that if an intense period of work followed by an extended period of leisure turns out not to be the ideal approach retirement – and that instead, better alternatives might be an extended period of "semi-retirement" (with part-time work) or a series of "temporary retirements" (interspersed with sabbaticals and then new careers) – that the traditional retirement savings approach might not make sense either. Because the reality is that if retirement is really more about doing different and perhaps more fulfilling (but not necessarily zero-income) work, then it really might not take nearly as much to "retire" as commonly assumed. And "retirement" portfolios themselves might look very different, if their primary purpose is to be a buffer for retirement transitions and perhaps scaled-back work, rather than a period of earning nothing at all. Some actually necessitate more savings, but have a smaller average balance (as it's built up and spent), while other types of retirement would actually allow for less ongoing savings and smaller retirement account balances (supplemented by partial work in "semi-retirement" that could last for years or decades).

Ultimately, the key point is that because the 'traditional' path to retirement might not be the preferred option for every client, financial advisors can offer value by letting clients know about the different paths available to them (e.g., engaging in a series of "semi" or "temporary" retirements) and evaluating the financial consequences of different paths to help them design their next several decades in a way that best matches their desire to balance work with other pursuits!

How Much House Is Too Much?

(Nick Maggiulli | Of Dollars And Data)

A strong majority (approximately 65%) of Americans own their homes (with or without a mortgage), which typically is the largest purchase they will make, their most significant ongoing expense (if they have a mortgage), and often their largest individual asset. In fact, 25% of homeowners have at least 81% of their assets in their primary residence (notably, a primary residence tends to be a household's largest asset for net worth tiers up to $1 million, according to Federal Reserve data, though this percentage declines significantly as individuals reach higher wealth brackets, where [also somewhat illiquid] business interests tend to take over). Which puts a premium on getting this decision 'right'.

One way to consider a home purchase decision (whether buying for the first time or moving to a new home) is to assess how it fits in among an individual's total assets. For instance, an individual with an expensive home but few other assets can be susceptible to diversification risk if their home value deteriorates significantly (further, having a large ongoing mortgage payment could impair cash flow and the ability to invest in other assets over time). Other factors that can be considered include illiquidity risk, ongoing maintenance and property tax costs, as well as the cost of having assets tied up in the house (which comes with an uncertain appreciation potential).

Amidst this backdrop, individuals can consider applying different 'rules of thumb' to a potential home purchase to see if it might be overly burdensome to their financial situation. These include both asset-based tests (e.g., an age-based approach where those under age 35 would want to have their primary residence represent no more than 40% of their total assets while those over age 55 would want this figure to be not more than 20%) and income-based approaches (e.g., the "36% rule" where total debt payments shouldn't exceed 36% of one's monthly income).

Though, at the end of the day, a primary residence is not just a financial asset, but also a use asset in which an individual will live. Which makes financial advisors (who have a solid understanding of their clients' goals and financial situation) well positioned to apply both financial planning tools (e.g., analyses conducted using financial planning software that go beyond more basic rules of thumb) and more qualitative discussions (e.g., the tradeoffs of buying a home with a certain cost) to help their clients make the best possible decision for their unique situation!

Is Buying A House For Only 3 Years A Mistake?

(Elliott Appel | Kindness Financial Planning)

Given the transaction and other costs related to buying, owning, and selling a home, a typical rule of thumb is for an individual to only buy a home if they plan on staying in it for at least five to seven years. However, the home-buying decision is not just a financial one and lifestyle considerations are often counterbalanced against the dollars and cents of the purchase.

Despite being an advisor well aware of the "5–7-year rule", Appel and his wife bought a house with the intention of only living there for three years before an expected move elsewhere. Nevertheless, while fellow advisors questioned his decision, for him and his wife, non-financial considerations outweighed the financial risks of owning a home for a relatively short period of time. To start, Appel and his wife had been living in a rented apartment that was very close to train tracks (and frequent horn blowing), disrupting his work (since he works from home) and sleep. When looking for a house to rent to get more space (and away from the train tracks), they continuously got out-competed in a market with limited supply. That led them to consider looking for houses to purchase (despite their expected three-year timeline to live there) and eventually led them to their current home (which required them to waive the inspection and other terms). The house ended up needing a new deck and patio door ($20,000) and other repairs that added to their cost. Nevertheless, Appel doesn't currently regret the purchase (given the additional space and solitude it provides) while still recognizing the possibility that they might take a loss when they look to sell it in two years (though they would also have the possibility of renting it out if the housing market took a sharp downturn).

Ultimately, the key point is that the decision of whether to buy a home (and how much to spend on it) is not just a matter of dollars and cents, but also a key input in a client's lifestyle as well. Which suggests that while an advisor might initially question a client who plans to buy and sell a home within a relatively short period of time (or, in today's interest rate environment, selling a home with a 3% mortgage rate to buy one with a 7% mortgage), they can offer value by showing the client different financial scenarios (both short- and long-term) that might occur and allow the client to choose the course of action that best suits their needs.

Taking An Actuarial Approach To Advising A Retired Client Who Wants To Buy A (Second) Home

(Ken Steiner | Advisor Perspectives)

A common way for financial advisors to add value for clients is to help them analyze the implications of a major purchase. For instance, a retired client might tell their advisor that they're interested in buying a vacation home and will want to know how it might impact the sustainability of their financial plan. One option for advisors is to create a scenario in their financial planning software of choice with the home purchase under consideration and run a Monte Carlo analysis to see how it impacts the probability of success of the client's plan. Alternatively, Steiner suggests an actuarial approach that can determine the impact of such a major purchase on the sustainability of the client's plan and help clients make the best possible decision.

The key equation in this calculation is to determine the "funded status" of the client's retirement plan, which is determined by adding the present value of the client's risky assets and the present value of the client's non-risky assets (each of which will come with different return assumptions) and dividing this figure by the total of the present value of the client's discretionary expenses and the present value of their essential expenses. A 100% funded status would indicate that the client has sufficient assets to cover their future spending needs while a higher percentage would offer greater security and a lower percentage would signal potential danger that they might deplete their assets if they remain on their current path (based on the assumptions used).

With the client's baseline funded status established, the advisor could then see how it would be impacted by the potential home purchase by reducing the client's total assets by the estimated upfront cost (in this case, either the entire cost of the home if bought outright or the down payment being made), increasing the client's total spending liabilities by the present value of additional annual expenses (e.g., property taxes and maintenance costs), and (if the client will be receiving rental income from the house), increasing total assets by the present value of additional income generated by the house. The advisor can then compare the pre-purchase funded status with the post-purchase figure and show their clients how the purchase would impact the sustainability of their financial plan. For instance, a reduction in funded status from 150% to 130% might not cause clients too much concern, whereas a drop from 110% to 90% might make the clients more circumspect about the purchase (though they might choose to reduce their spending in other areas to blunt the impact of the home purchase).

In sum, financial advisors have more than one tool in their toolbelt when it comes to analyzing the impact of large purchases by their retired clients. And while advisors might not consider themselves to be actuaries, taking an actuarial approach could provide clients with a metric that allows clients to better understand the impact of potential purchases on the sustainability of their financial plan!

The Science Of Support: How Relationships Drive Real Change

(Meghaan Lurtz | (Less) Lonely Money)

Recent decades have seen an explosion in "self-help" books and products that often promise to help individuals overcome whatever is holding them back from greatness (and to do it on their own). However, a broad range of research suggests that meaningful, lasting change is more likely to occur when individuals have the benefit of supportive relationships.

Various research studies have found a wide range of benefits from social support, including calming the body (reducing stress and risk for several diseases in the process), changing how individuals see challenges (making them seem smaller and more manageable), building confidence (by receiving encouragement from trusted partners), driving behavior change (through peer accountability and other mechanisms), and strengthening decision-making (with collaborative thinking often leading to better results than solo reasoning). Having witnesses to one's efforts and struggles can also make eventual success more gratifying and lead to greater feelings of self-worth.

The benefit of social support is evident in the financial planning context as well. For instance, while it's possible to manage finances successfully on one's own, having a financial planner as a partner can provide a wide range of benefits, from serving as an accountability partner to offering possibilities and planning strategies that a client might not have considered to helping clients think through decisions with major financial implications (which is why many 'DIYers' seek out advisors, including those offering 'advice only' services). Advisors can also be a key foundation of support when clients go through major life transitions, such as retirement, divorce, or receiving an inheritance. And for financial planners themselves (whether they're a solo firm owner, a leader of a larger firm, or an employee), working with a "mastermind" or "study" group consisting of peers can provide support, encouragement, and accountability for both business and career planning (advisors can also potentially benefit from working with a coach as well).

Ultimately, the key point is that while the ability to 'go it alone' might seem like an admirable trait from the outside, ignoring the potential benefits that come with social support could make it more difficult to reach one's personal, professional, and financial goals!

How To Find The Time To Connect With Colleagues When You're Very, Very Busy

(Elizabeth Grace Saunders | Harvard Business Review)

In the workplace, colleagues are not just partners who help the company fulfill its mission, but also can be valuable outlets for connection, commiseration, and advice. However, given often jam-packed work schedules (and, in the remote environment the lack of natural interactions that occur in the office), it can sometimes be hard to find opportunities to connect with colleagues on a personal level.

One way to generate more social interactions is to reserve time during regular one-on-one or team meetings to check in on how things are going outside of work (e.g., as in the Entrepreneurial Operating System's [EOS's] "segue", where meeting participants share personal and professional "good news" from the past week). Also, seeking out social opportunities during regularly scheduled breaks can help build relationships as well. For example, an individual might seek to have lunch with a different teammate each week (whether going out from the office or, for remote teams, holding a 'virtual' lunch). For those who are extremely busy, commuting time (whether driving, in a ride-share vehicle, or at the airport) can offer opportunities to connect with colleagues over the phone outside of the formal work environment. And when time is so short that face-to-face or voice conversations are challenging to fit in, leveraging messaging systems (e.g., Slack or Teams) can at least offer an opportunity to check in with a colleague in text form.

In the end, while it can seem hard to carve out time to build personal connections with teammates, already-planned meetings, breaks, and time on the move can offer opportunities to build these relationships. Which can ultimately lead to a more enjoyable, connected workplace experience (and possibly greater productivity along the way?).

4 Ways To Find Belonging

(Michael Easter | Two Percent)

While hobbies and avocations can be enjoyable when done on one's own, experiences are often more meaningful when they're done with others. Sociologist coined the term "collective effervescence" to describe the feelings of energy and in-person connection when individuals come together in a group around a shared purpose, which could be professional (e.g., a workplace team) or personal (in Easter's case being a "Deadhead" and enjoying the experience of the band Grateful Dead with other fans).

For those who might be in a personal or professional rut, finding belonging in a larger group of like-minded individuals can be a motivating experience. To start, an individual can consider their interests and how they might apply them (which could be volunteering, joining a sports league, or a fan club of a favorite singer or band). The internet can be a helpful resource in this regard, as there are online communities for just about any interest imaginable. A key, though, is to eventually get offline and meet in person with like-minded individuals, which can offer the opportunity to find common ground and shared history with others in the group. By being open and welcoming to others, it's possible to widen your social circle (e.g., Easter found that fellow "Deadheads" come from all walks of life) beyond those who you'd be likely to meet in day-to-day life.

In sum, there are a variety of ways to find belonging in a group of like-minded individuals, whether professionally (e.g., a networking group advisors working with a similar type of client) or personally (e.g., a book club or recreational sports team), which could create opportunities for both advisors (who could expand their professional network and learn best practices from others) and their clients (especially retired clients who might be looking to replace the sense of purpose that came from their careers).

---

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 "Wealth Management Today" blog.