Weekend Reading For Financial Planners (May 31–June 1)

Survey Finds Financial Advisors' Return To The Office Varies Based On Position, Experience

(Andrew Foerch | Citywire RIA)

While some financial advisory firms previously operated remotely, the COVID pandemic drove nearly all firms into a remote environment, at least temporarily. Which led to changes for both firms themselves (e.g., setting up technology for remote work) and for their clients (who might have shifted to virtual meetings). Over time, though, firms have faced the decision of whether to continue to operate entirely virtually, returning to the office full-time, or perhaps taking a hybrid approach of having employees work in the office a few days per week with flexibility on other days.

According to a Citywire RIA survey of 106 advisory firm employees, about half of respondents are working in the office full time (i.e., 5 days per week) with 17% having 4 days in the office, 16% spending 3 days in the office, and about 8.5% of respondents reporting that they work entirely virtually (notably, though, the pool of respondents doesn't necessarily represent a representative cross-section of the advisor community). Of note, the average number of days spent in the office varied by job title, with client-facing advisors spending the most time in the office (4.13 days per week), followed by client service employees (3.83), and CEOs (3.77) with Chief Investment Officers (2.92) having fewer in-office days. The number of days spent in the office tended to decline gradually by years of experience, with newer employees (i.e., those with 0–5 years of experience) averaging 4.18 days in the office each week, those with 11–15 years of experience averaging 3.79 days, and respondents with 21–25 years of experience having 3 days in the office (at the same time, those with at least 26 years of experience had the most in-office days of all, with 4.27, perhaps because they were more likely to be in executive or senior advisory roles that necessitated more in-person time?).

Altogether, this survey suggests that while the vast majority of advisory firms have returned to the office at least part time, there remains significant variability among firms and their employees. Which perhaps presents an opportunity to craft an in-office policy that meets the needs of the business (e.g., the demand for in-person client meetings), its employees (who might value having in-office time with managers and co-workers but also want some flexibility), and its clients (some of whom might prefer to meet virtually).

How RIAs Are Approaching AI Use In the Absence Of Formal Regulatory Guidance

(Alec Rich | Citywire RIA)

Since ChatGPT burst onto the scene in late 2022, many financial advisors have been curious about the potential use cases for it and other generative Artificial Intelligence (AI) tools. However, given the relatively new nature of this technology (including software incorporating it), some advisors might be concerned whether its use might put client data in danger or lead to other ethical concerns (e.g., when is financial advice so AI-assisted that it's no longer really "your" advice as the financial advisor?) or regulatory concerns.

So far, the Securities and Exchange Commission (SEC) has yet to issue formal rules around AI use (though it did release a "Compliance Plan" last September that could lay the foundation for future rulemaking), leaving advisory firms to consider whether and how they want to use AI in their businesses. To start, some firms have established AI "acceptable use policies" (based on their risk tolerance) that outline which AI tools and functions the firm feels comfortable using and incorporate input from a variety of stakeholders (e.g., compliance staff and advisors, though for smaller firms this responsibility might fall to a single person). Further, firms appear to be most concerned about how their clients' personal identifiable information is used and protected when leveraging AI-powered tools (in part due to the fact that client information security is already a regulatory priority). Also, firms are considering how to ensure clients are able to give their consent for the use of AI tools (e.g., meeting notetaking tools that might store a recording of the conversation).

In sum, many advisory firms appear to be taking a cautious, but curious, approach to AI adoption in the absence of formal regulatory rulemaking (though firms can take advantage of other resources for guidance, including CFP Board's Generative AI Ethics Guide. Which some industry observers suggest could ultimately be a productive approach for the industry if the SEC sees that advisors are able to leverage AI without major violations of their fiduciary responsibilities to their clients (perhaps leading to a less prescriptive approach from the SEC and greater flexibility in terms of what types of AI tools might be in play for advisors in the future?).

Report Details Opportunities For Advisors Amidst Growing Women-Controlled Wealth

(McKinsey & Company)

As women's earning power has grown in recent decades, so too has the wealth they control, whether as the primary earner and/or household financial manager or as a single person with significant assets. For instance, in the United States, total assets controlled by women rose from about $10 trillion in 2018 to about $18 trillion in 2023 (expanding from 31% to 34% of U.S. AUM in that time) and McKinsey projects that this total will reach $34 trillion by 2030 (representing approximately 38% of total U.S. assets.

Notably, women appear somewhat less likely than men to work with financial advisors (with 53% of assets controlled by women currently unmanaged, compared to 45% of assets controlled by men), potentially offering an opportunity for financial advisors to serve these potential clients. The report identifies six different investor archetypes amongst women that advisors could target, with the largest being the "delegating investor" (30%–35%), with approximately $550,000–$650,000 in assets (primarily within workplace retirement plans) who seeks investment advice, followed by the "advisor-dependent retiree" (20%–25%), who averages $650,000–$750,000 in assets and is seeking advisor expertise and in-person advice in particular. Some smaller cohorts could be particularly interesting to advisors as well, including the "pre-retiree guidance seeker" (5%–10% of women investors), who has approximately $1.2 million in assets (which could grow further as they advance in their careers) and is looking for guidance from a trusted advisor in return for bundled fees (as the report identifies that women are becoming increasingly fee-aware).

To effectively serve the cohort of increasingly wealthy women, the report suggests that firms build teams that can more effectively reach women (notably, the report doesn't advise that women clients should be matched with women advisors; rather, having teams made up of both men and women can potentially lead to better-informed recommendations and stronger relationships overall with different clients). In addition, when working with couples, the report suggests an emphasis on meeting the needs of both partners, including involving each in key planning decisions (which can lead to better retention in case of divorce or the death of one spouse).

In the end, while financial advisors have long served the needs of clients of both sexes, the projected increase in women-controlled wealth could offer an opportunity for firms who are able to meet their sometimes-unique planning needs (e.g., building sustainable retirement income strategies for their [on average] longer life expectancies). Which could ultimately lead to better financial outcomes for these clients and greater asset and revenue growth for the firms themselves!

Spending Drops In Retirement, But Satisfaction Doesn't: David Blanchett

(John Manganaro | ThinkAdvisor)

News headlines often flag a "retirement crisis", where a significant share of individuals are having (or will have) unsatisfying retirements because of a lack of savings (amidst the declining prevalence of defined-benefit pensions). In fact, according to a 2024 poll commissioned by Prudential, 58% of respondents somewhat or strongly agreed with the statement that "a national retirement crisis exists". However, according to the same poll, only 26% of actual retirees described their personal situation as a crisis (with just 10% of those with $50,000 or more in total savings indicating the same), suggesting there might be a disconnect between perceptions of a crisis (particularly amongst those still working) and retirees' actual experiences.

One potential reason for this disconnect, according to retirement researcher David Blanchett, is that retirees don't necessarily need to replace the same standard of living in retirement as they had during their working years. Using data from the Health and Retirement Study, Blanchett found that about 90% of retirees are moderately or very satisfied with retirement (despite the fact consumption declines by 20%, on average, when entering retirement), with satisfaction increasing alongside age and consumption levels. For example, while only approximately 45% of respondents consuming between $20,000 and $30,000 per year are satisfied with their financial situation, 84% of those age 80 or older with the same dollar consumption are satisfied. This extends to higher consumption levels as well, with about 80% of those between ages 50–54 with consumption of at least $100,000 expressing satisfaction with their financial situation, while more than 90% of those 75 and older in the same consumption bucket reported the same. Notably, individuals 75 and older with consumption between $75,000 and $100,00 were more likely to say they were satisfied with their financial situation than 50–54-year-olds with consumption greater than $100,000, suggesting that financial satisfaction can potentially increase in retirement even if total consumption is less than in one's working years.

Ultimately, the key point is that while individuals might logically seek to replace their pre-retirement consumption once they enter retirement (with some working individuals feeling stress that they won't be able to save enough to reach this target), Blanchett's analysis suggests that while having relatively more consumption in retirement leads to greater satisfaction with one's financial situation, the apparent wellbeing effects of retirement itself (e.g., more time for non-work pursuits) appear to counterbalance to a certain extent a potential reduction in consumption. Which means that while working-age individuals might feel they are in 'crisis mode' when it comes to saving for retirement, in reality, many might be on a path to similar, or even greater financial satisfaction in retirement (perhaps boosted by a financial advisor who can analyze future possibilities and leverage advanced retirement income techniques to increase their ability to consume in retirement!).

One Size Fits One Regarding Retirement Spending

(Tony Isola | A Teachable Moment)

Entering into retirement offers clients a wide range of possibilities, from how they fill their time to how they spend their money. However, flipping the 'switch' from savings mode (during one's working years) to spending mode (potentially seeing their account balances decline as they withdraw assets in retirement) can be a challenge for some clients. Others might feel uncomfortable making large purchases or adding 'luxury' spending to their lifestyle. Which, in some cases, could lead clients to spend less than they otherwise be able to afford to.

Nonetheless, advisors might be able to help clients identify areas of (potentially increased) spending that could bring them greater happiness in retirement. For instance, as clients enter and move through retirement, the amount of time they have left in their lives (and the number of healthy years they have to pursue a wide range of activities) declines. Which could encourage some to make the most of the years they do have, perhaps in ways they might not have considered before. For example, while travel is a common retirement pastime, clients who were diligent savers during their working years might not consider the possibility of flying in business or first class. However, given the upgraded comfort level of doing so (which could leave them more refreshed and able to enjoy the destination), clients with the financial means might find that upgrading their travel could be a worthwhile investment. For others, a lifestyle 'upgrade' might be a more comfortable car, a remodeled kitchen, or even just a daily coffee from the local coffee shop that makes each day more enjoyable.

In the end, while financial advisors are sometimes tasked with identifying the limits of a spendthrift client's budget, others might have the opposite issue and leave potential enjoyment in retirement on the table. Nonetheless, advisors have a variety of options to support clients in this situation, both technical (e.g., framing the results of Monte Carlo analyses as a "probability of adjustment" rather than a "probability of success") and behavioral (e.g., suggesting that they might spend in ways that 'upgrade' their experiences in retirement).

6 Retirement Spending Myths

(Sheryl Rowling | Morningstar)

When a prospective client reaches out to a financial advisor, they likely have many preconceived notions about how they 'should' handle their finances. Which offers advisors the opportunity to dive into the prospect's (and hopefully, future client's) financial details to see whether these assumptions actually apply to their particular situation.

For instance, a prospect nearing retirement might assume that they will need to keep their spending steady in retirement and avoid large 'splurges' (e.g., a dream car). However, planning analysis might find that a truly one-time large spending event might not have a major impact on the sustainability of a financial plan (whereas a long-term lifestyle upgrade could be more challenging). Next, some prospects might assume that they need to have their mortgage paid off before retirement. While this could be a good option for some clients (particularly for those with mortgages with relatively high interest rates), others might be better off holding onto the mortgage or paying it down slowly (e.g., those who would need to take a large distribution of pre-tax contributions from a retirement account [which could put them into a higher tax bracket] to pay off the mortgage). Other prospects might come to an advisor with most of their assets tied up in their home equity but be hesitant (given previous abuses in the industry) to consider a reverse mortgage as a way to tap into that equity to help fund their lifestyle needs in retirement (presenting an opportunity for advisors to determine whether it might be an appropriate option for their needs and, if so, to help them identify a high-quality financing partner). Finally, while some prospects might be planning to make their major charitable bequests at death (perhaps to avoid estate tax exposure), it's  very likely that they will receive greater tax benefits by lifetime giving (e.g., through Qualified Charitable Distributions), if the advisor determines they have the financial wiggle room to do so (which can also lead to greater enjoyment from being able to see their donation put to work during their lifetimes).

In the end, an advisor's value is not just the original planning ideas and recommendations they bring to the table, but also their ability to encourage prospects and clients to reconsider preconceived notions about their retirement. Which could ultimately lead them to have more a prosperous, and more enjoyable, retirement experience thanks to their advisor!

Confessions Of A Financial Planner: I Handle Most Of The Finances

(Elliott Appel | Kindness Financial Planning)

For financial advisors working with client couples, it's common to see one of the partners be the 'household CFO', with the other partner being less engaged when it comes to day-to-day money management. While this situation might evolve naturally (e.g., because one partner is more knowledgeable or enjoys personal financial issues more), it can have negative consequences in case of divorce or the death of the 'CFO', as the other partner might not be able to acclimate quickly to the financial responsibilities they'll need to take on.

Despite being aware of the potential perils of having a 'CFO' spouse, Appel (the founder of a financial advisory firm) notes that he manages the financial issues in his marriage, from paying most bills to managing investments (as many other financial advisors are likely to do as well!). Which could create a situation where his wife might not be prepared to step into the 'CFO' role if needed. Nevertheless, there are several steps couples can take to ensure both partners can take on the financial manager role if needed. To start, the 'CFO' might create a binder (whether physical, or using a digital tool such as Everplans or Trustworthy) that includes account information, the locations of important documents, contact information for insurance agents or other key financial partners, and more. In addition, including the non-CFO partner in on regular financial tasks (e.g., reviewing investment statements or the couple's tax return) can provide them with exposure to the tasks they might need to take on one day. And some couples (including those where one partner is a financial advisor themselves!) might decide the best course is to engage a financial planner, who not only can serve as a go-to contact in case of emergency but who can also serve as a second opinion on financial decision making and a neutral arbiter for money conflicts that might arise.

Altogether, given that relatively few couples are likely to share financial management responsibilities evenly, financial advisors can offer value by ensuring that both partners are aware of their financial picture and contribute to the goal development and planning process. Which could be valuable to a wide range of couples – including those where one is an advisor themselves!

Staying Regular: Helping Client Couples Hold Regular Money Meetings

(Heather and Douglas Boneparth | The Joint Account)

Because many couples have trouble holding productive discussions around money, one way that financial advisors add value for client couples is to ensure that both partners are aware of their financial situation and participate in the decision-making process. Nonetheless, given that the advisor might only meet with a couple once or twice each year, encouraging them to hold regular (i.e., monthly or quarterly) money meetings between themselves can keep the lines of communication open between them and perhaps fend off money-related conflicts.

For some couples, busy schedules might make it easy to forget to hold a regular money meeting. To avoid this circumstance, blocking off time on the calendar well in advance (perhaps thanks to a reminder from a financial advisor?) can increase the chances that the date will stick. Also, given that one or both partners might not necessarily look forward to money discussions, pairing the regular money meeting with an activity that both partners enjoy (e.g., going to a favorite restaurant) could make it more likely to stick (and start to make one's brain associate it with connection rather than dread). Using the meetings to track progress and 'wins' (rather than seeking perfection) can also make them more enjoyable than determining whether predetermined targets were hit (though some couples might like to use the check-ins to see whether they're on track to meet certain goals before the next time they meet with their advisor!). Also, using the money meeting not only to discuss 'spreadsheet'-type issues, but also hopes, intentions, and challenges can open up the conversation and perhaps inspire new goals (possibly lead to a more productive conversation with their advisor the next time they meet).

In sum, regular money meetings can help client couples keep the lines of communication open in between meetings with their financial advisor. And by taking a few small steps, clients can increase the chances that they will stick to a regular schedule and have more meaningful conversations (and perhaps reduce the number of 'surprises' their advisor encounters in their next meeting?).

4 Questions To Discover 'Actual' Risk Tolerance Differences In Couples

(Sydney Squires | Nerd's Eye View)

Measuring a client's risk tolerance is both an art and a science. Beyond assessing how a client feels in the moment, advisors must evaluate a client's long-term behavioral tendencies, actual risk capacity, and financial goals – all of which require considerable time and skill. These dynamic complexities multiply when working with couples, where each partner has unique preferences and traits and may influence the other's risk-taking behaviors.

Risk tolerance questionnaires alone often fail to capture the full picture of a couple's risk dynamics. While each partner may have distinct preferences and traits, their financial decisions are rarely made in isolation. For example, one person may be highly risk-averse, which can pressure the other to take on more risk to compensate for their partner's behavior. Furthermore, household dynamics often lead one partner to take on the role of "Family Financial Officer", who drives most of the financial decisions while the other partner remains less involved. Yet, even if one partner isn't actively managing finances, they are still affected by saving and spending decisions. And, if they feel overlooked – especially in early stages of working with an advisor – it can increase the likelihood of disengagement.

However, risk tolerance assessments can serve as a valuable tool for building goodwill with both partners – and setting the stage for long-term financial harmony. As a starting point, individual psychometric risk assessments can help identify two key considerations: whether there's a gap between a client's individual questionnaire score and their stated goals, and whether there are significant differences in risk tolerance between the two partners. From there, the advisor can guide clients in productively navigating these differences.

Advisors may want to ask what the client thought about the risk tolerance assessment, encouraging each partner to share their perspectives on financial risk, their past behavior with risk-taking, and their personal 'story' of risk, which can help the advisor better understand how each partner approaches financial decision-making. These conversations also offer an opportunity to discuss preferred communication styles about financial matters (especially in response to market performance). In the short term, focusing on shared priorities can promote alignment, while in the long term, honoring each partner's risk preferences can lead to more balanced financial decisions and a stronger sense of partnership in managing their wealth.

Ultimately, the key point is that a couple's risk tolerance is shaped by a combination of personal history, future concerns, and the ways that partners influence each other. Navigating differences in risk isn't a one-time evaluation but an ongoing conversation. And by proactively addressing these dynamics, advisors can help couples build confidence in their financial decisions and create a strong foundation for collaboration over time!

How I'm Decluttering My Life This Spring

(Ryan Holiday)

"Spring cleaning" is a common pastime for many individuals, offering an opportunity to eliminate some of the physical clutter in one's space (whether at work or at home). Notably, though, such an exercise can be extended beyond physical "stuff" to less tangible clutter as well.

For instance, you might review your current list of subscriptions (both professional and personal) to see whether some might no longer be necessary (or perhaps whether some automatic, recurring charges have increased beyond the service's value). Another way to 'clean up' is to review your 'information diet' to assess whether you might be able to save time (and potentially stress and money as well) by limiting the news and social media content you consume. Similarly, reassessing how others can reach you can lead to time savings as well, whether by reducing the number of messaging services you use or limiting different mediums to certain groups (e.g., only sending and receiving text messages with personal contacts). Spring could also be a good time for an inbox clean-out, whether in terms of deleting unneeded messages or creating a time block to respond to lingering emails that require a reply. Finally, a calendar review could be productive as well, perhaps by identifying a regular meeting that might no longer be necessary (freeing up time both for yourself and for the other participants!).

In sum, while a buildup of 'stuff' in one's physical space might be more obvious, other 'clutter' can lead to less time for higher-value tasks and personal activities (and greater expenses), suggesting that including these in a 'Spring cleaning' ritual could lead to returns in the form of more time, clearer headspace, and greater productivity in the year ahead!

What To Do When You're Overloaded And Delegating Isn't An Option

(Fans van Loef and Jordan Stark | Harvard Business Review)

Leading a business or a team can be a challenging endeavor, as many managers have both individual and leadership responsibilities. When a leader's to-do list is full, the guidance is often to delegate certain tasks to team members. While this can be an effective tactic, it could eventually reach a limit (whether in terms of overwhelming team members or narrowing down responsibilities to those that must be completed by the manager).

In these cases, one option for overloaded leaders is to consider whether certain of their responsibilities could be done in a "good enough" manner rather than attempting to do everything "perfectly" (this can extend to the team as well, which can free up their time, potentially for additional delegated responsibilities). In today's world, efficiency could be gained on relatively low-stakes tasks by leveraging generative AI tools to generate ideas or content, with the leader or employee taking the time to edit it into "good enough" format. Another potential way for a leader to reduce their workload is to identify and eliminate hidden low-value tasks, such as certain in-person meetings that could be held asynchronously or reducing the number of intra-team emails that are sent (or at least only sending them to those who have a true need to be on them). A final option is for managers to strategically reduce their availability, perhaps by identifying meetings or projects in which their input isn't necessary.

In the end, while it can be tempting for a leader to be "all in" on their personal responsibilities and those of their team members, taking a step back to assess what tasks, meetings, and processes truly require their participation and eliminating those that don't can ultimately lead to more sustainable workflow and lower stress levels for the manager (and, perhaps, their team as well!).

7 Essential Processes To Help Firms Run More Efficiently

(Libby Greiwe | XY Planning Network Blog)

Effective processes are at the heart of many successful businesses, as they can promote efficiency (by having a defined way to complete a certain task) and consistency (in terms of the output created), facilitating a firm's growth. Greiwe identifies seven key processes for financial planning firms that, when executed well, can allow the firm to more effectively scale (and remain compliant with relevant regulations).

The first key process is marketing, where firms can reduce friction (i.e., obstacles that slow down workflows) by understanding what's worked in the past and creating a repeatable process to execute chosen tactic(s) repeatedly. Next, the process of converting prospects into clients can benefit from streamlined processes, including meetings and data collection (e.g., she suggests that firms might aim to have 80% of this process be templated, with the remaining 20% customized for each client). The onboarding process is also a key area to consider, as creating a consistent, high-touch experience can set the tone for what could be a decades-long relationship with the client. For ongoing client service, creating a set of scheduled touchpoints (e.g., using a client service calendar) not only can set client expectations (and lead to a better client experience) but also can help the firm operate more efficiently (e.g., by holding client meetings during certain parts of the year or analyzing specific planning areas for all clients at the same time). In addition, having a standardized referral process (e.g., in how the firm asks for referrals or holds referral events) could prove to be more productive than more ad hoc approaches to referral generation. Finally, evaluating the employee experience (e.g., roles, responsibilities, and expectations) can both help retain current employees and attract new ones.

Ultimately, the key point is that establishing (or refining) an advisory firm's processes can help it run more efficiently and promote a better, more consistent experience for both clients and employees (and very likely free up time for firm leaders as well!).

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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 "Wealth Management Today" blog.