Weekend Reading For Financial Planners (October 24–25)

Authors:

Adam Van Deusen, CFP®

Team Kitces

Adam Van Deusen, CFP®, is a Financial Planning Nerd at Kitces.com, where he hosts the Financial Advisor Technician podcast, writes articles for the Nerd’s Eye View blog (including the popular Weekend Reading for Financial Advisors), and regularly speaks at industry events on a range of technical and practice management topics. He previously worked at a financial planning firm in the Washington, D.C. area and as a journalist covering the banking and insurance industries. Outside of work, he serves as a volunteer financial planner and class instructor for local and national non-profits.

Read more of Adam’s articles here.

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Investor Trust In Human Advice Up, AI Advice Down In 2026: Survey 

(Steve Randall | InvestmentNews) 

A major theme in the financial advice industry during the past few years has been the growth of Artificial Intelligence (AI)-powered advice tools, with advisor-facing products having the potential to generate greater efficiency for advisors (perhaps freeing up time for higher-value activities). At the same time, advancements in AI have led to some consternation that consumer-facing tools (that could be much less expensive than human-provided advice) could lead many investors to pursue this form of advice. 

Given the high stakes involved in managing one’s financial situation, trust is paramount, whether working with a human advisor (e.g., demonstrating they have the expertise needed to serve the client and will act in the client’s best interest) or a digital tool (e.g., overcoming the ‘trust penalty’ that can come with giving control over to an online program).  

Amidst this backdrop, a recent survey of 2,123 investors with at least $100,000 in investable assets prepared by KPMG and sponsored by investment industry trade group Securities Industry and Financial Markets Association (SIFMA) finds that human advisors maintain a trust advantage over AI advice tools, and this gap has expanded, particularly amongst younger investors. Compared to the prior-year survey, trust in financial advisors for investment advice ticked higher (to 52% from 50%), while trust in the use of AI-powered investing tools alone dipped (from 8% to 5%). Notably, while Gen Z investors showed the highest absolute level of trust in AI-only investment advice (10%, compared to 7% for Millennials, 7% for Gen X and 2% for Baby Boomers), they also experienced a significant drop in trust since last year (from 20% to 10%), perhaps reflecting this group’s growing awareness of the limitations of this technology (notably, trust in AI-only advice declined across all generations). 

Looking at what drives a positive investment advice experience, priorities varied significantly by generation, with a majority of Boomers (66%) and Gen Xers (63%) citing returns as the most important factor, while Millennials (30%) and Gen Zers (38%) frequently cited transparency. Only a minority of respondents (between 9% and 12% depending on the generation) cited costs and fees as the most important factor, offering potential room for advisors to differentiate themselves on transparency and personalized service. 

In sum, this survey suggests that human advisors continue to have an advantage when it comes to winning investors’ trust, including amongst relatively younger investors who might have more fluency with AI tools. Nevertheless, as the capabilities of AI-powered tools continue to evolve, advisors can work to maintain this level of trust by leaning into the factors that help humans stand out from their digital counterparts.  

IRS Finalizes Rules For The New Car Loan Interest Deduction

(Kelly Phillips Erb | Taxgirl) 

The “One Big Beautiful Bill Act”, passed last year, included a wide range of tax measures, from permanently increasing the standard deduction to making changes to itemized deductions. The law also introduced several new deductions, including those for qualified tips, qualified overtime compensation, and for new auto loan interest. 

The Treasury Department recently issued finalized rules regarding the latter deduction, which could be of interest to certain clients in the market for a new car (or who recently purchased one). The deduction (which is capped at $10,000 per tax return, not per car or per person) applies to interest on a loan used to purchase an “applicable passenger vehicle” (i.e., one that meets several requirements, including being new, and having had final assembly occur in the United States) for personal use (notably, under the final regulations, the vehicle only has to be used for personal purposes more than 50% of the time, making mixed-use vehicles potentially eligible). 

There are several factors that could limit the applicability of this deduction, however. To start, the deduction begins to phase out once Modified Adjusted Gross Income (MAGI) exceeds $200,000 for married couples filing jointly and $100,000 for other taxpayers and is completely phased out once MAGI reaches $250,000 for the former group and $150,000 for the latter. Also, the deduction is temporary, only applying to tax years 2025-2028 (though it’s possible it could be renewed or made permanent in future legislation), meaning that an individual taking out a qualifying car loan in 2027 might only receive this deduction for two years. On the other hand, the deduction is available whether a taxpayer takes the standard deduction or itemizes, making it available to a wider range of clients. 

Altogether, the new car loan interest deduction presents a potential tax savings opportunity for clients looking to buy (and finance) a new car. That said, given the restrictions on who (and what kinds of cars) can qualify for this deduction, financial advisors can support their clients by assessing the actual value of this deduction for their particular situation (including whether financing the car is the right choice for them in the first place!).   

Advisors Have A Big Impact On Long-Term Care Planning: Survey

(Joel Kranc | ThinkAdvisor) 

While retirement is often a time of leisure after a long career, the later years can also come with deteriorating health and the possibility that an individual will need outside care, whether in-home or at a residential facility. While the ‘fun’ parts of retirement might be more enjoyable to plan for, some individuals might put off planning for potential long-term care needs (a less enjoyable, but important, topic). 

According to a survey by Northwestern Mutual of 4,375 U.S. adults, 66% of respondents who work with a financial advisor said they had planned for a potential long-term care need, while only 34% of other respondents said the same, suggesting a valuable role for financial advisors not only in crafting a plan that meets a client’s unique needs (e.g., deciding whether to purchase a long-term care insurance policy), but also, at a more basic level, creating a plan in the first place. In terms of care location, 73% of respondents said they preferred in-home care, while 27% said they’d prefer to move to a nursing home, assisted living, or other medical facility (notably, the preference for in-home care increased with age, with 83% of Boomers indicating this preference). While some individuals might assume that in-home care will be cheaper than a residential facility, these costs can still add up, with data from Northwestern Mutual’s 2025 Cost of Care study indicating the annual cost of a home health aid providing eight hours of care per day was $99,280. 

The survey also highlighted that the costs of long-term care aren’t just borne by those receiving it, but also can be incurred by loved ones as well. 39% of survey respondents said they currently provide care or have done so in the past, with younger respondents more likely to have done so. Amongst the group of caregivers, 69% said they have taken at least one step to absorb the financial impact, including reducing spending (32%), drawing down savings (25%), and working longer hours or taking on a second job (21%). Which suggests the long-term care conversation could be applicable across ages, whether in terms of an individual’s own need or in expectations for serving as a caregiver themselves for a loved one in the future.    

Ultimately, the key point is that because long-term care planning is something that can be tempting to put off by individuals, financial advisors are well-positioned to raise this key planning conversation and serve as an accountability partner to support clients in following through on their chosen path (in addition to raising care issues (and their potential financial and time costs), such as how they might handle a care request from a loved one, that they might not have previously considered). 

Filling Tax Brackets May Be The Wrong Roth Conversion Strategy

(Retirement Researcher) 

Roth conversions are a popular strategy amongst financial advisors, as they potentially allow clients to pay a lower lifetime tax rate by paying taxes today on assets moved from a traditional retirement account to a Roth account and avoid a potentially higher tax rate down the line when they are forced to distribute assets from the traditional account through Required Minimum Distributions (RMDs). Notably, most investors engage in partial Roth conversions (i.e., only converting a portion of a traditional retirement account’s assets in a particular year rather than the entire account at once, as the latter could push them into an undesirably higher tax bracket), which means they (and their advisors) have latitude to determine how much to convert in a given year. 

One strategy to determine how much to convert in a particular year is to ‘fill up’ the investor’s current bracket. For instance, an advisor might determine that their client could realize $30,000 of additional income while remaining in the 24% bracket. While limiting the size of a (partial) Roth conversion to this amount would prevent a ‘jump’ to the 32% bracket that would come from a larger conversion, there are other tax factors that could affect the marginal tax rate the client pays.  

For example, depending on their age and individual circumstances, a Roth conversion could affect the taxation of a client’s Social Security benefits, the taxation of long-term capital gains and qualified dividends, their ability to qualify for a premium tax credit (if they’re on a marketplace health insurance plan), their income for calculating potential net investment income tax exposure, and/or push them across an Income-Related Monthly Adjustment Amount (IRMAA) ‘cliff’ threshold. With this in mind, advisors can support their clients by determining the true marginal tax rate being paid on the Roth conversion amount and consider whether it is still likely to lead to a lower lifetime tax bill (and/or tax bill for their heirs if they plan to bequeath assets). This calculation can also consider what the client’s future RMD exposure and income breakdown at that time will look like to estimate the marginal rate they might pay then (though this will necessarily include an assumption of what tax brackets will look like then as well). 

In the end, while (partial) Roth conversions can be a valuable planning tool, crafting an effective strategy requires a careful analysis of a client’s complete tax picture today and projections for what it might look like in the future. Which highlights the value of annual reviews and an ongoing planning relationship, as the optimal amount to convert in a given year could change over time!  

When Paying More Tax, Not Less, Is The Smart Play

(Laura Saunders | The Wall Street Journal) 

In general, financial advisory clients would prefer to pay less in taxes in a given year. Yet, as many advisors will recognize, taking a longer-term view (and potentially increasing a tax paid in the current year) could ultimately lead to a smaller lifetime tax bill. 

For individuals who are still working, perhaps the most common way individuals might have a higher tax bill today (for a hopefully lower one tomorrow) is in making pretax, rather than after-tax, contributions to their workplace retirement account (or in making Roth IRA rather than deductible traditional IRA contributions). While making pretax contributions would lower this year’s tax bill, after-tax Roth contributions could lead to a lower lifetime tax bill (especially if the taxpayer is currently in a relatively low tax bracket compared to where they might be in retirement). Similarly, engaging in (partial) Roth conversions can increase the current-year tax bill but potentially provide a long-run benefit by reducing the size of traditional accounts and future RMDs (which can both put a taxpayer into a higher tax bracket and potentially make them subject to income-based adjustments such as IRMAA).     

Another instance where paying more in taxes today could be beneficial is for those with inherited traditional IRAs, who have 10 years to deplete the account (though some are subject to RMD requirements during this period). While it might be tempting to defer taxes for the full 10 years, distributing the entire account at that point could mean being pushed into a (much) higher tax bracket for that year, whereas partial distributions during the period could keep an individual in their current bracket. Separately, those with concentrated stock positions or certain stock options might choose to sell or exercise these positions gradually over time to avoid the larger future tax bill that could occur by doing so all at once. 

In sum, while financial advisors often take a long-term view when it comes to their client’s tax exposure, it can sometimes be challenging to get clients (and/or their accountants, who are sometimes focused on minimizing the current year’s tax bill) on board with strategies that require increasing their tax bill today. Which suggests that advisors who can clearly communicate the potential value of such a strategy (perhaps including both verbal and visual elements to support client engagement?) could provide greater value to their (perhaps skeptical, but curious) clients. 

Roth Versus Traditional Account Contributions And Tax Rate Uncertainty

(David Hulse | Journal of Financial Planning) 

The introduction of the Roth IRA in the late 1990s (and, a few years later, the Roth 401(k)) expanded the options available to retirement savers, who were previously limited in the types of contributions they could make. That said, the decision to make deductible or pretax contributions versus Roth contributions is not clear-cut in many cases and can depend on a client’s views on future tax rates, their personal expected income trajectory, and their desire for greater certainty, amongst other considerations.  

In general, pretax contributions are expected to lead to a higher After-Tax Accumulation (ATA) when an individual’s tax rate is higher today than it is expected to be in the future, while Roth contributions can be preferable when the rate today is lower than the expected future rate (with the ‘tax equivalency principle’ suggesting that there is no difference in ATA when current and future rates are the same). Another dimension of this question, though, given the unknown nature of future tax rates, is the level of uncertainty about the future ATA depending on the contribution type chosen. 

Hulse finds that pretax and Roth contributions not only can lead to different ATAs (depending on current versus future tax rates) but also can come with different levels of uncertainty. Isolating his analysis to tax rates and returns (i.e., not including factors such as the ability to make Roth conversions or qualified charitable distributions), he finds that there is a tradeoff between these two factors in that the contribution choice with the highest expected ATA also has the highest expected uncertainty (which can notably be to the upside). For instance, an individual who makes pretax contributions because they believe their tax rate will be lower in the future would benefit if this turns out to be the case, but their ultimate ATA will vary depending on the tax rate they encounter (moreso than the Roth contributor, who might end up with a lower balance but has a lower variance of outcomes). 

Ultimately, the key point is that there is rarely a guaranteed ‘right’ answer when it comes to making retirement account contributions (with actually making contributions perhaps being a more important factor?). That said, financial advisors have the opportunity to support their clients by explaining the uncertainties and tradeoffs involved with this decision and apply their knowledge of the client’s financial situation and preferences to craft a recommendation (along with being flexible to change the approach in future years as the client’s circumstances evolve!).   

A Five-Step Framework For Handling Fee Objections

(XY Planning Network Blog) 

In the past, the cost of receiving financial advice for consumers wasn’t particularly salient, as they might have struggled to make sense of the true cost of various investment charges and commissions. While the growing popularity of fee-based financial planning arguably offers better alignment between advisors’ and clients’ interests, it also makes the cost to clients much more salient as well. Which means that advisors will inevitably have to confront prospective clients with the cost of services they offer. 

Sometimes, prospects take the fee conversation in stride (perhaps because the advisor posted their fees and minimums on their website and/or because they determine that the advisor’s value proposition more than makes up for fees they pay). Other prospects, though, might hesitate after learning about the advisor’s fee, compare the fee to another advisor’s that they’re considering, or ask for a discount on the fee. Which can sometimes put advisors on the defensive, perhaps leading some to go over their value proposition one more time, while others might choose to negotiate a lower fee to land the client (which could create longer-term profitability and pricing issues if many clients get a discount). 

An alternative approach is to start by acknowledging the concern (e.g., by noting, “Choosing an advisor is a significant investment, and it’s worth taking the time to make sure it feels like the right fit.”). Next, the advisor can bring the conversation back to the prospect’s goals (to help both sides determine whether the planning relationship will be a good fit) before explaining what’s included in their planning offering (which could differentiate a comprehensive financial planner from another advisor option who only offers investment planning services). The advisor can also connect their work to real outcomes, from improving tax efficiency, coordinating with other professionals, to focusing on the outcomes that their particular planning process is designed to support. Finally, giving the prospect room to decide can reduce the pressure in the moment and allow the conversation to end on a positive note. 

In the end, while offering financial advice to clients can be rewarding in its own right (and many pro bono planning opportunities are available!), at the end of the day advisors need to generate income to support their business (including any employees and their own lifestyle). Which suggests that charging an appropriate fee and being able to link the value provided to a prospect’s personal situation can both give the advisor more confidence (and fee consistency) and help the prospect determine whether the advisor might be a good long-term fit. 

A One-Sentence Response To Prospect Fee Concerns

(Ari Galper | Advisorpedia) 

An advisor might make their pitch to a prospect over the course of one or more discovery meetings and feel confident that the prospect is on the path to becoming a client. However, the good vibes can come to a halt if, after presenting the firm’s fee schedule, the prospect suggests that the fee seems high. 

Galper suggests that rather than being about the fee itself, such a comment by a prospect represents a test of the advisor’s willingness to bend on their standards. With this in mind, he suggests that advisors (rather than jumping [back] in to a recitation of their value proposition) offer this response: “You’re right – the fee can feel that way if we haven’t had a chance to fully understand your situation together yet.” This first part of this response acknowledges the concern, while the second shifts the conversation to an exploration of the prospect and their needs rather than a defense of what the advisor can provide. For instance, the prospect might explain why they’re unsure they need an advisor relationship, how they had a negative experience with a previous advisor, or how they’re the type to always negotiate on price. In this way, the advisor can respond directly to the underlying concern rather than getting into a negotiation on the fee. 

In sum, when prospects express concern about the cost of advisory services, their underlying concern might not actually be the size of the fee itself, but rather their trust in the (new) advisor and whether working with them will lead to exemplary results. Which suggests that a steady, non-reactionary approach on the advisor’s part could ultimately lead to a positive outcome for both parties. 

Communicate (The Necessity Of) Fee Increases With A Client-Centric, Value-Based Approach 

(Ben Henry-Moreland | Nerd’s Eye View) 

Recent years have seen an increase in the number of RIAs charging fixed monthly retainer fees, and while retainer fees can have several advantages over other types of fees, one notable disadvantage – particularly as compared to traditional AUM fees, which tend to increase automatically in line with financial markets – is that financial advisors who use them must proactively raise their fees from time to time in order to keep up with business expenses, invest in new upgrades, and increase their own take-home income. The necessity of fee increases entails a certain amount of pain for monthly-fee advisors since each conversation around raising fees creates the possibility of pushback from clients that could put a strain on the client-advisor relationship. 

This is all the more true when clients are dealing with cost increases in other areas from high inflation, yet the reality is that many advisors are also facing inflation in the form of higher business costs. As a result, monthly-fee advisors may see a decrease in their take-home income if they don’t increase their fees at least enough to keep up with their rising business expenses. 

But using business costs alone as a justification to raise fees can backfire on the advisor. For one thing, it limits the amount that an advisor can raise their fees to roughly the rate of inflation in their business expenses, which translates into no net increase in take-home income. And even more importantly, higher business costs as a rationale for raising fees is bound to ring hollow with clients since they are likely to care much less about the advisory firm’s expenses than about the fact that they will be paying a higher fee going forward, 'just' to receive the same level of service they were already getting. 

A better way to implement and communicate fee increases may be one that is centered around providing more value to the client in exchange for the higher fee. To start, this signifies a client-centric approach, shifting the basis of the increase from the advisory firm and its needs (to maintain its profit margins with higher business costs) to the client and what the fee increase means to them. Furthermore, it increases the potential for the amount that the advisor can increase their fees since clients are more likely to accept a higher increase when there is clearly something in it for them as well! 

When communicating fee increases to clients, then, it’s important to be concrete and confident about how the advisor will bring extra value to the relationship (which, of course, means having a plan to deliver that value in the first place). Because, while any conversation around fees comes with the possibility of client pushback, that extra value represents a powerful argument for why it's in the client’s best interest to go along with the change – and if the client ultimately decides they don’t want to accept the higher fee and ends the relationship, it creates a new opportunity to add clients who do see the value in the higher fee. 

Ultimately, nearly every advisory firm that charges monthly fees will eventually need to raise those fees to at least maintain a steady take-home income. But advisors who want to grow their income beyond ‘just’ the rate of inflation in their business cost can do so by stepping up their value to their clients – whether in the form of more services, better technology, or just greater experience and expertise allowing them to go deeper into planning! 

Try Before You Commit

(Derek Hagen | Meaningful Money) 

Goal setting is a common part of the financial planning process, giving clients the chance to explore their financial and lifestyle objectives for the short-, medium- and long run while providing the advisor with valuable information to help align the client’s plan. A problem with major goals, though, is that the client might not have fully thought out what it would be like if it’s actually achieved (e.g., retiring from a job but then not knowing how to fill their newly freed-up schedules), which could lead to disappointment down the line. 

With this in mind, clients might consider engaging in experiments that could help them refine their goals. For example, the common goal of retirement offers many opportunities for experimentation, whether it’s taking shorter sabbaticals during their career or downshifting to semi-retirement later on, to gauge how they might fill the extra hours in their day. Many clients have a new (perhaps warmer) destination in mind for retirement but some might not have considered the full implications of such a move (e.g., moving to Florida might sound nice in the winter, but perhaps might not be so pleasant in the summer). With this in mind, trying out extended stays in the new location (at different times of year) could provide valuable information without committing to a full-time move.  

Other clients might have a negative bias that prevents them from pursuing goals that could end up boosting their wellbeing. For instance, a pre-retiree might be nervous about drawing down their account balances to fund their lifestyle in retirement. In this case, having the client make a single, large purchase (e.g., a vacation) while still working (using assets from their portfolio) could help them understand what it will actually feel like to spend in retirement (and perhaps provide inspiration for travel or other activities to pursue once they get there!). 

In the end, while big-picture goals can be helpful, taking the time to experiment before committing to one could lead to greater confidence that the chosen goal is the ‘right’ path or provide valuable insights that could lead to the goal being revised (or a totally new goal being created!). 

The Benefits Of Engaging In (Tiny) Experiments Rather Than Chasing Life Goals  

(Anne-Laure Le Cunff | The Guardian) 

Whether it’s a New Year’s Resolution or a long-term objective, goal-setting is a common (and often encouraged) practice. The problem, though, is that when goals aren’t met (whether they’re abandoned in progress or their objectives aren’t reached), it can be discouraging and perhaps lead to smaller ambitions. 

An alternative approach to seeing major goals is to engage in smaller-scale life experiments that are more likely to be completed and offer a low-risk way to determine whether a more significant life change might be in order (shifting the objective from “Am I there yet?” to “What can I learn?”). For instance, while changing jobs can be a riskier endeavor, an ‘experiment’ of scheduling coffee once a week with someone for a company or field that might be of interest could provide valuable information without much risk. Similarly, with regard to relationships, an individual might set a goal of meeting a long-term partner within the year. Given the challenges of doing so, however, a more achievable experiment might be to take one action per week (e.g., attending a social event, asking a friend for an introduction) that could lead to a relationship. Also, the world of health offers many opportunities for experiments, from trying to go to sleep at the same time each night for 10 days to shifting a workout to the morning from the evening for a month.  

Altogether, while goal setting can be valuable to have longer-term targets to work towards, shorter-term experiments can be more likely to be completed while also offering valuable information that could be used to inform a future goal! 

Failure As A Competitive Advantage

(Investment Masters Class) 

When looking at a successful company (in the financial advisory business or otherwise), it can be easy to assume that they make a string of ‘good’ decisions that lead to strong business outcomes. In reality, though, many companies experience failures and the most successful ones often are those that are willing to experiment and learn from their mistakes. 

For example, under the “Palchinsky Principle”, a company might seek out new ideas, test them on a scale where failure is survivable, gather feedback from the people closest to the work, and learn before committing significant resources. This approach incentivizes team members to bring new ideas to the table and (if approved) try them out to see if it could lead to a larger-scale initiative. The key, though, is to ensure that these initial experiments are “survivable” in the sense that failure won’t mean lasting damage (in financial or reputational terms) for the company. Also, actively seeking feedback (whether positive or negative) from the experiment (and ensuring that team members won’t be judged if they provide candid [if negative] feedback) can ensure that the proper lessons are learned (and mistakes aren’t repeated) if the company decides to move forward with a broader-scope project.   

Ultimately, the key point is that the public image of successful companies is often the tip of the iceberg, with many experiments (some of which will inevitably fail) unseen beneath the surface. Which suggests that growth-oriented firms might not just stick with what’s working today but could find value in trying out innovative opportunities that could make their growth more sustainable into the future.

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.