CE Course Catalog

November 12, 2018

There is little unbiased research and insight when it comes to how financial planners actually work: prepare plans, technology, and fees. Moreover, to remedy this issue and begin to fill in the gaps, Kitces Research conducted a survey of over 1,000 financial advisors in the Spring of 2018. In this research-based newsletter, we begin to answer these questions about how financial planners work.

LO #1: Identify the different ways in which financial advisors use their time, and in what ways they may want to change the way they spend their time.

LO #2: Identify the difference between financial advisors’ approach to financial planning and plan delivery as well as plan components.

LO #3: Identify how different members of a financial advisory team, depending on business channel, impact financial plan creation.

LO #4: Identify the CFP® can impact plan development and time spent developing the plan.

LO #5: Identify the ways in which financial planners communicate with clients.

LO #6: Identify the ways in which financial planning tools can impact the financial planning process and plan development.

LO #7: Identify the ways in which financial planning fees and fee structure are related to the business model and clientele.

Registered Investment Advisor (RIA): A firm or individual registered with the Securities and Exchange Commission or state authorities and working in the investment advice business.

Broker-Dealer (B/D): This is a type of business structure where the firm or individual trades and sells securities, from its own benefit, as well as to its customers.

Assets Under Management: This is a type of fee structure where the fee is based on how much the client has under management with his or her advisor

Retainer: This is the type of fee structure where the base retainer is a set price and then additional fees can be added on, on top of that base retainer.

Insurance Broker: This individual sells and negotiates insurance for compensation.

Calculator: Use a plan to calculate needs and recommend solutions.

Comprehensive: Use plan software output to bring together a holistic picture of a client solution.

Customized: Create a custom-written plan for an individual client’s circumstances.

Collaborative: Use planning software collaboratively/interactively life in client meetings.

Property and Casualty (P&C) Insurance: This is the type of insurance that covers your things – cars, home, ect. It also provides coverage to protect you if you’re responsible for an accident or injury.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

December 4, 2018

In this month’s newsletter we look in depth at strategies for applying behavioral finance within a financial planning context, including the ways in which System 1 and System 2 decision making processes differ, the impact of saliency on decision making and behavior, behavioral patterns for following through on commitments, the impact of “herd” behavior in financial planning, and how the “End of History Illusion” affects financial planning!

LO #1: Identify the differences between System 1 and System 2 decision making processes and when they are used.

LO #2: Identify the impact of Saliency on decision making and behavior.

LO #3: Identify behavioral patterns of following through on commitments and breaking goals into smaller pieces.

LO #4: Identify the behavioral impact of “herd” or peer behavior in financial planning.

LO #5: Identify how the “End of History Illusion” affects financial planning.

System 1: Decision process that makes automatic and fast decisions.

System 2: Decision process that requires processing and thinking.

Depletion of System 2: Loss of ability to use System 2 depletion due to exhaustion.

Choice Architecture: Design of how to present choices to an individual.

Saliency: The quality of being particularly noticeable or important.

Modular Financial Planning: Financial planning that deals with subsets of goals and issues separately.

Comprehensive Financial Planning: Financial planning that deals with all goals and issues together.

Social Proof: behavior that looks for validation of or accountability to other individuals from a group.

End-Of-History Illusion: the inability to foresee a change in yourself in the future despite observing changes from the past.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 14, 2018

In this white paper, we explore retiree health insurance provided through Medicare, the core components of Medicare coverage, how different components of Medicare are provided and the costs of coverage to retirees, the role that Medicare Advantage can play for retirees trying to further manage down the cost of premiums, the initial enrollment periods for signing up for Medicare, and the importance of reviewing Medicare coverage annually.

LO #1: Identify the primary source of health insurance for those over age 65.

LO #2: Identify the three core components of Medicare coverage.

LO #3: Identify standard premiums for Medicare coverage.

LO #4: Identify the health insurance coverage provided by Medicare Advantage.

LO #5: Identify Medicare initial enrollment periods.

Medicaid: The program that was specifically designed to cover medical and long-term care costs for low-income individuals who cannot afford to pay for their own care, and has specific means-based income requirements for eligibility.

Medicare: Created by Congress, this program provides health insurance for anyone/everyone who was eligible for Social Security benefits as well.

Medicare Part A: Known as “hospital insurance”, it is designed to specifically cover inpatient care in a hospital. It also provides a small about of coverage for skilled nursing, home health, and hospice.

Medicare Part B: This is the more traditional “medical insurance” component of the program, covering a wide range of both preventative and medically necessary “non-hospital” medical expenses.

Medicare Part C: This can be considered an alternative to being enrolled in traditional Medicare. It is offered through private insurers, not CMS.

Medicare Part D: This is the prescription drug coverage portion of Medicare.

Centers for Medicare & Medicaid Services (CMS): This is the Federal agency that administers the single-payer national health insurance program

Medigap: These are supplemental policies designed to fill in the “gaps” of Medicare coverage.

High Deductible Health Plan (HDHP): According to the IRS, these are plans where the deductible is at least $1,350 for an individual and $2,700 for a family. Yearly out-of-pocket expenses within these plans range from $6,650 for individuals and up to $13,300 for a family.

Health Savings Account: This is one of the few “triple tax benefit” accounts available to off-set HDHPs. It allows those that qualify to have tax-deductible contributions, tax-deferred growth, and tax-free qualified distributions.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 9, 2018

In this white paper, we explore the rules for post-death required minimum distributions of inherited retirement accounts, how the obligation of beneficiaries to take post-death withdrawals varies significantly depending on the type of beneficiary (and whether they are a “designated” beneficiary or not), steps to take to comply with the various obligations that beneficiaries face when inheriting such accounts, and strategies for retirement account owners to consider – before death – to minimize how much beneficiaries are obligated to withdraw in the future, allowing them to maximize and “stretch”, to the extent possible, the ongoing tax-deferral benefits of (inherited) retirement accounts.

LO #1: Identify the rules for post-death required minimum distributions (RMDs).

LO #2: Identify how the obligation of beneficiaries to take post-death withdrawals varies depending on the type of beneficiary.

LO #3: Identify the steps to take to comply with various obligations that beneficiaries face when inheriting retirement accounts.

LO #4: Identify pre-death strategies for retirement account owners to consider when trying to minimize future beneficiaries’ obligation to take withdrawals.

LO #5: Identify the ongoing tax-deferral benefits of inherited retirement accounts.

Designated beneficiary: A living breathing human being

Paper beneficiary: Also known as a non-designated beneficiary, which is a trust, estate, or charity; a non-living, breathing human

Decedent: The person who has passed away.

Stretch IRA: A strategy that limits the required distribution when an IRA is inherited.

Required Minimum Distribution (RMD): This is the minimum amount that must be withdrawn from each account, each year. Roth IRAs do not require an RMD until after death, all other accounts to require yearly withdrawals starting at age 70 ½

5-Year Rule: This rule gives beneficiaries five years to grow assets inside the Roth IRA without tax, but at the end of this window the beneficiary must move all funds from the inherited account.

Required Beginning Date: April 1^st of the year following the one in which the account owner turned 70 ½

Beneficiary Designation Date: September 30^th of the year after death.

Distributable Net Income: In a trust scenario, DNI is the max amount received by an individual who owns a unit or a security in an investment trust, or beneficiary, that is taxable; any amount above this figure will be tax-free.

Roth Conversion: This is an IRA rollover that happens to land in a Roth account, such that the rollover “converts” the pre-tax account into a Roth.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 20, 2018

The fundamental benefit of a traditional pre-tax retirement account is the opportunity to enjoy tax-deferred growth. However, if withdrawals aren’t happening, eventually the government will require that a minimum amount of distributions begin (and become taxed), under the so-called “Required Minimum Distribution” (RMD) rules. In this white paper, we examine that while it’s always desirable to minimize and defer taxation to the extent possible, it’s important to recognize that a pre-tax IRA will be taxed eventually. Which means managing RMDs doesn’t avoid taxation, although it can provide at least some tax deferral value.

LO #1: Identify the age at which RMDs must begin.

LO #2: Identify the timing at which RMDs must begin.

LO #3: Identify RMD requirements for Roth 401(k) and Roth IRA accounts.

LO #4: Identify the method for calculating RMDs.

LO #5: Apply the RMD aggregation rule considering varying types of retirement accounts.

LO #6: Identify the method for calculating an RMD on a deferred annuity with a guaranteed benefit rider.

Required Minimum Distribution (RMD): The amount the retiree must withdraw from retirement accounts starting at 70 ½.

Qualified Charitable Distribution (QCD): A “Qualified Charitable Distribution” under IRC Section 408(d)(3) is a distribution made directly from an IRA to a (public) charity. The maximum amount for an individual is $100,000, but spouses may contribute up to $200,000.

Qualified Annuity: A qualified annuity is one that is purchased inside of a tax-qualified (I.e., tax-preferenced) retirement account, such as an IRA or a 401(k).

Benefit Riders: There are both living and death benefit riders. These riders are a descriptive class of contractual add-ons to insurance and annuity products. They provide additional benefits for the contract holder and are purchased at an extra cost.

Deferred Income Annuity: Also referred to as a deferred immediate annuity or a “longevity annuity”, the contract is similar to a traditional immediate annuity in that the purchaser hands over a lump sum check now, in return for receiving a stream of future payments (typically for life). The difference, however, is that while an immediate annuity has payments that begin immediately, a DIA’s payments may not begin until a distant future point in time.

Qualified Longevity Annuity: Related to the DIA, this annuity MUST begin payouts no later than age 85, provide only fixed payments, and have no cash surrender value once purchased. No more than 25% of any employer retirement plan may be invested in a QLAC, up to a cap of $125,000.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 25, 2018

Financial planners can learn an immense amount of information about a client’s circumstances by reviewing an individual income tax return. However, the reality is that the complexity of a tax return doesn’t conform neatly to typical income tax planning strategies. In this white paper, we look line-by-line at the key parts of an individual income tax return, which lines and sections should commonly be reviewed, and the sorts of tax planning strategies (or potential tax problems) that can be identified by reviewing a tax return.

LO #1: Identify the various sections of the 1040 tax form and what information is contained within them.

LO #2: Understand the difference between “above the line” and “below the line” deductions.

LO #3: Explain how AMT is determined and when a taxpayer would be subject to it.

LO #4: Discuss the steps involved in reviewing a family’s tax return and what to look for when doing so.

LO #5: Discuss the special tax planning considerations that would applicable when reviewing a self-employed business owner’s tax return.

LO #6: Discuss the special tax planning considerations that would be applicable when reviewing a retiree’s tax return.

Alternative Minimum Tax (AMT): This is an alternative, but mandatory, standard income tax.

Adjusted Gross Income (AGI): This is the measure of income calculated from your gross income and used to determine how much of one’s income is taxable.

Exemption: This is a monetary amount that one gets to subtract from what becomes their taxable income.

Filing status: This is the category that defines the type of tax return the taxpayer uses when filing. It has a lot to do with marital status.

Qualified Charitable Distribution (QCD): This is distribution from an IRA (other than a SEP or SIMPLE) paid to a qualified charity from the IRA directly.

Individual Retirement Account (IRA): This is a tax-deferred retirement plan, meaning the individual does not pay taxes when the money goes in, but when the money comes out it is taxed as regular income.

Roth IRA: A compliment to the IRA, the Roth IRA is an after-tax savings vehicle. Taxes are paid when the money goes into the Roth IRA, but earnings on the account and withdrawals from the account after age 59.5 are tax-free.

Health Savings Account (HSA): Used in conjunction with high-deducible health insurance policies, this allows individuals and families to save money, tax-free, for medical expenses.

Personal Exemption Phaseout (PEP): This amount is adjusted annually based on inflation, and it is what a taxpayer would be entitled to claim against personal income.

Minimum Tax Credit (MTC): This is tax credit against any future regular income tax liability, but only t the extent that the credit doesn’t reduce your tax liability so low that it cause AMT exposure against you.

Tax Credits: This is the amount of money that can be used to offset a tax liability.

Required Minimum Distribution (RMD): This is the minimum amount that must be withdrawn from an account: IRA, SEP IRA, SIMPLE IRA, ect. once you have reached age 70.5. However, this does not apply to Roth IRAs, which only required distributions once the owner has passed.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 3, 2018

In this month’s newsletter we look in depth at strategies to maximize the value of tax-free Roth accounts, from doing “backdoor Roth” IRA contributions and “mega” backdoor Roth contributions through an after-tax 401(k), to doing systematic partial Roth conversions (into multiple accounts to take advantage of the Roth recharacterization rules), and why every client should get a Roth account started, even if just with a $100 contribution or conversion, to start the infamous 5-year clock for getting future tax-free Roth distributions!

LO #1: Identify the four factors that determine when a Roth IRA is the best option.

LO #2: Demonstrate a comprehensive understanding of the “Backdoor Roth” strategy and discuss how it helps high income earners contribute to a Roth IRA.

LO #3: Describe how to maximize the use of low tax brackets with partial Roth conversions.

LO #4: Clarify the separate account rules for Roth recharacterizations.

LO #5: Discuss how clients can use multiple accounts for potential recharacterization

LO #6: Explain how you can help a client satisfy the 5-year rule for tax free qualified Roth distributions

Traditional IRA: An Individual Retirement Account is a savings vehicle that provides a tax-break; they provide tax-deferred growth until the assets are withdrawn.

Roth IRA: An Individual Retirement Account is a savings vehicle that provides a tax-break. In contrast to the traditional IRA (tax-deferred growth) the Roth IRA uses after-tax dollars (taxes have already been paid) and then the money grows tax-free and is tax-free upon withdraw at retirement.

Roth Conversion: This is the process by which an investor my “convert” a traditional IRA into a Roth IRA.

Required Minimum Distribution: This is the minimum amount that must be withdrawn from each account, each year. Roth IRAs do not require an RMD until after death, all other accounts do require yearly withdrawals starting at age 70 ½.

Income in Respect of Decedent (IRD) Deduction: Allows beneficiaries to subsequently deduct for income tax purposes any estate taxes attributable to a pre-tax IRA.

Backdoor Roth: Make a traditional IRA contribution, followed thereafter by a Roth conversion. Used for high income earners that are barred from contributing to a Roth IRA.

Beneficiaries: This is the individual that will receive the benefit from a will, trust, life insurance or Roth IRA. This may be a person or it may be a trust.

Adjusted Gross Income (AGI): Gross income minus adjustments to income, i.e. personal exemptions and itemized deductions.

Recharacterization: This rule gave investors the option to switch a now Roth IRA back to a traditional IRA.

5-year rule: This rule gives beneficiaries five years to grow assets inside the Roth IRA without being taxed, but at the end of this window the beneficiary must remove all funds from the inherited account.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 23, 2018

In this issue of The Kitces Report, we explore the issues to consider when evaluating the benefits and economic impact of various Social Security claiming strategies, from the importance of understanding who is eligible for benefits in the first place, to the breakeven analysis needed in deciding when to claim the Social Security benefits! We also look at how crucial, and complicated, Social Security planning is for couples. As a result, it’s necessary to gather and consider the full range of client goals and preferences to optimize Social Security planning solutions, rather than just focus on the strategy that gives the most amount of money by delaying all the way until 70, or pays the client immediately at age 62. Finally, we wrap up by identifying the various Social Security “reform” proposals, and consider how potential changes to Social Security in the future should impact the claiming decision.

LO #1: Clarify who is entitled to Social Security benefits and be able to calculate the Social Security benefit your clients will receive. Be able to explain the difference between, and understand the meanings of, the acronyms AIME, PIA, and COLA.

LO #2: Describe what the Full Retirement Age (FRA) is and explain how choosing dates to receive Social Security benefits that are before or after the FRA impact the benefit amount.

LO #3: Illustrate an understanding of the cost/benefit analysis on the decision to delay Social Security benefits. Be able to calculate the additional benefit received for delaying while also calculating the time to break even. Explain why there might be times when clients may not want to delay Social Security benefits.

LO #4: Identify the three unique factors that drive the relative benefit of delaying Social Security benefits and explain how these factors act as a hedge to a portfolio.

LO #5: Discuss why Social Security planning is more complicated for couples than individuals. Understand what a restricted application for spousal benefits is, and identify when these might be relevant. Identify challenges that pertain to couples in timing Social Security benefits.

LO #6: List the four key options for couples claiming Social Security benefits.

LO #7: Understand when the Social Security “Earnings Test” applies, and to whom it applies. Explain the impact it can have on your client’s benefits.

LO #8: Identify the various Social Security “reform” proposals that have been presented and explain how future reforms could impact the optimal claiming decision.

Social Security: A government program that provides monetary assistance to people with inadequate or no income

Averaged Indexed Monthly Earnings (AIME): AIME is used to calculate one’s actual social security benefit. It is determined by adding up the top 35 years of (inflation-adjusted) Social Security work history, and dividing by 35 years x 12 months/year = 420 months.

Cost-Of-Living Adjustment (COLA): COLA is typically equal to the percentage increase in the consumer price index, it is an adjustment for social security to help handle inflation

Consumer Price Index: This is an list or index of the variation in prices paid by a typical consumer for retail goods and other items.

Inflation: This is the general increase in price, or the fall of purchasing power, of different goods

Primary Insurance Amount (PIA): This is the benefit that is calculated using the income replacement formula. It represents the benefit the retiree would get at full retirement age.

File-and-Suspend: Allowed by the Senior Citizens Freedom to Work Act of 2000, file-and-suspend was a way to “take” one’s benefit and allow the spouse to receive the spousal benefit while spending one’s own benefit so it could continue to grow. This was ended by the Bipartisan Budget Act of 2015

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 25, 2018

In this issue of The Kitces Report, we explore the issues to consider when evaluating the benefits and economic impact of various financial planning strategies, from the importance of deciding how to measure the outcomes in the first place, to the challenging “compared to what” problem that makes it difficult to objectively assess the value of a particular financial planning recommendation and whether or by how much it will actually improve the outcome. We also look at how many financial planning strategies reduce risk enough to make them viable strategies, even though the economic impact is actually negative! As a result, it’s necessary to gather and consider the full range of client goals and preferences to optimize financial planning solutions, rather than just focus on (positive) economic value alone.

LO #1: Discuss why being able to quantify the economic benefits of financial advice is important to both you as the financial planner, and your clients.

LO #2: Clarify the importance of accurately measuring the economic outcome that is desired. Explain how selecting financial planning strategies should be aligned with the desired outcomes.

LO #3: Explain the “compared to what” problem. Illustrate an understanding of the fundamental issues when trying to assess the economic impact of a financial planning recommendation.

LO #4: Be able to evaluate research in previous studies. Explain the inherent issues of the prior studies on the financial impact of various financial planning strategies. Discuss how baseline assumptions influence the result of the prior studies, how risk management might reduce returns but reduces long-term risk significantly, and how and why “tax alpha” is different from investment alpha.

LO #5: Identify the three primary reasons as to why it is difficult to calculate the economic impact of a financial planning recommendation. Discuss how the economic consequences of financial planning strategies are relative to the client.

LO #6: Explain why and how behavioral coaching may be the greatest economic impact to a client, the significance of interpersonal communication, and why it is so difficult to measure and assess its impact.

Advisor Alpha: Vanguard defines this as “how advisors can add value, or alpha, by providing relationship-oriented services”. It is how the advisor’s knowledge and relationship with the client can improve overall investment performance.

Advisor Gamma: By Morningstar, the goal is to evaluate how the financial outcomes of retirees are improved by engaging in five financial planning strategies, for more effective asset allocation to dynamic withdrawal rate spending approaches to proper asset location decisions.

Capital Sigma: Developed by Envestnet, this is their way to quantify the value of advice between financial advisors and their client’s portfolios.

Utils: A unit of measures for utility.

Utility function: A concept derived from economics, the purpose of utility function is specifically to assign a measuring unit – “utils” – to potential outcomes. More positive spending levels means, for example, more utils.

Prospect Theory: A behavioral economic theory that identified that human beings have greater aversion to losses than the enjoyment we gain from an equal favorable result. The theory was developed by Daniel Kahneman and Amos Tversky.

Risk-Adjusted: This is referring to how one should refine investment returns based on the amount of risk one had to take to produce that return.

Tax-Alpha: Another value-ad for clients and advisors, this is the opportunity to engage in proactive tax strategies to generate tax savings either through asset location and or tax loss harvesting.

Asset location: This is when advisors decide where to hold or “locate” assets amongst taxable accounts, tax-deferred accounts, or tax-free accounts.

Tax Loss Harvesting: This is a process of selling an investment that has experienced a loss in order to capture a loss for tax purposes (offsetting a gain) without permanently changing the underlying investment/portfolio.

• CFP / IWI (formerly IMCA): Intermediate/Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 20, 2018

In this month’s newsletter, we take a deep dive into rebalancing, looking at where it actually does enhance returns, where it’s better as a risk management strategy, why a “tolerance bands” approach to rebalancing may be more effective than just doing rebalancing at regular time intervals, and why rebalancing is still be worth doing in the long run, notwithstanding all of these challenges!

LO #1: Explain how regular rebalancing can actually decrease long-term returns of a portfolio.

LO #2: Discuss the concept of a “rebalancing bonus” and how one might successfully go about achieving it.

LO #3: Describe how “tolerance bands” work and why it is that they might be more effective when rebalancing when compared to regular time intervals.

LO #4: Illustrate an understanding of the differences between absolute and relative rebalancing thresholds and how each of them impact rebalancing targets.

LO #5: Be able to explain how those that are currently saving, or are in retirement and making withdrawals, can rebalance without requiring any tax-triggering trades.

LO #6: Discuss why rebalancing might be behaviorally difficult for clients to implement.

Portfolio Rebalancing: Realigning the balance of investments in a portfolio, generally to stay in accordance with the original target weightings for that portfolio.

Tolerance Bands: In contrast to timed rebalancing (daily, quarterly, yearly), the threshold for triggering a rebalancing trade is not the passage of time, but how over-weighted or underweighted it’s permitted to become given the relative movement of the underlying investment itself.

Asset Class: A group of securities that have similar characteristics and move in similar ways in the marketplace. The three most common classes are: stocks (equities), bonds (fixed-income), and cash (money market).

Target Allocation: This is how the portfolio is being strategically designed based on risk and goals. A retirement portfolio versus a portfolio designed for a child’s education may have different target allocations. The two portfolios would likely use different mixes of asset classes at different percentages to manage the risk and term length associated with the goal.

Volatility: A statically measure of how dispersed pricing is on a particular asset or asset class. In a volatile market there may be more opportunities for rebalancing.

Correlation: This is a measure of the relationship between to assets or asset classes. Correlations nearing 1 or -1 mean that the assets are moving together, where a 0 would mean that the assets are not correlated at all.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 20, 2018

In this month’s newsletter, we continue the discussion from last month’s newsletter and look in depth at the strategies that would merit the use of a trust as the beneficiary of a retirement account, and how a trust-as-beneficiary-of-an-IRA plays out with most popular types of trusts such as bypass, marital QTIP, spendthrift, or asset protection.

LO #1: Explain the challenges when qualifying a “See-Through” Trust as a designated beneficiary.

LO #2: Discuss why a “conduit” trust as a designated beneficiary of a retirement account may be problematic.

LO #3: Describe why it is crucial to monitor the beneficiaries of an “accumulation” trust as a designated beneficiary.

LO #4: Be able to identify the most common types of trusts that may end out as the beneficiary of a retirement account.

LO #5: Explain why, when leaving retirement account assets to a trust, it is generally a good idea to directly name the trust (or substrust) as a beneficiary.

Required Minimum Distribution (RMD): This is the minimum amount that must be withdrawn from each account, each year. Roth IRAs do not require an RMD until after death, all other accounts to require yearly withdrawals starting at age 70 ½.

5-Year Rule: This rule gives beneficiaries five years to grow assets inside the Roth IRA without tax, but at the end of this window the beneficiary must move all funds from the inherited account.

Conduit Trust: A situation in which the IRA distribution passes through the trust and is paid out immediately to the beneficiary.

Accumulation Trust: In contrast to the conduit trust, accumulation trusts allow assets to build within the trust and do not require immediate distribution.

Bypass Trust: A popular estate planning strategy used to reduce a couple’s exposure to estate taxes by leaving assets not to the surviving spouse, but to a trust for his/her benefit instead.

Marital Trust: In a typical “A-B” estate plan, the “B” trust is a bypass trust, and the “A” trust is a marital trust for the outright benefit of the spouse, either held in trust to the spouse, or created at the death of the first spouse but then distributed outright immediately to the surviving spouse.

Qualified Terminable Interest Property (QTIP) Trust: A type of trust that allows the grantor to provide for the surviving spouse, but also maintain control of how the trust’s assets are distributed once the surviving spouse dies. This trust takes advantage of the marital deduction but retain control over those assets for use in future generations of the grantor’s choosing.

Spendthrift or Asset Protection Trust: These trusts are virtually always an accumulation trust as they are designed to protect trust assets from a spendthrift beneficiary (one who is irresponsible with money) or to provide asset protection for the beneficiary, the trustee will generally be given discretion to limit distributions to the trust’s income beneficiary (thereby limiting access to the spendthrift/creditors).

Dynasty/Perpetuity Trusts: Only in certain states a trust can be established where funds will remain in trust “indefinitely”, or at least beyond the point of any currently living beneficiaries. These trusts are structured to capture benefits of many of the aforementioned trusts: protect funds from spendthrifts, provide protection to assets for subsequent generations, keep future growth shielded from estate taxes.

Revocable Living Trust or Testamentary Trust: These trusts are set up during the grantor’s lifetime and can be changed at any time during the grantor’s lifetime. It is an estate planning tool that enables the grantor to decide who and what is given to each beneficiary at death.

Irrevocable Life Insurance Trust (ILIT): Another useful estate planning tool, this trust is used to set aside the cash proceeds of a life insurance policy that can be used to pay estate taxes and/or beneficiaries, as the policy itself escapes taxation by being removed from the decedent’s estate.

Generation-Skipping Transfer (GST) exemption: Each individual, as of 2017, is allowed to give away during his or her lifetime up to $5,490,000 without any federal gift or estate taxes due. This amount will go up again in 2018 to $5,600,000.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 20, 2018

In this month’s newsletter, we look in depth at the issues involved in naming trusts as beneficiaries of retirement accounts, from the requirements for the trust to qualify as a “designated beneficiary” eligible for stretch treatment based on the underlying beneficiaries, to which beneficiaries must be considered for stretch purposes based on whether the trust is treated as a “conduit” or “accumulation” trust, and also the income tax ramifications of choosing to use a situation in such situations. In next month’s newsletter, we will continue the discussion with an exploration of the substantive planning issues and opportunities of using a trust as the beneficiary of a retirement account, and how a trust-as-beneficiary-of-an-IRA plays out with most popular types of trusts such as bypass, marital QTIP, spendthrift, or asset protection.

LO #1: Explain how Required Minimum Distributions (RMDs) are calculated (noting when to use the Joint Life Expectancy Table instead of the Uniform Lifetime Table) and when they are due. Also be able to distinguish between the Required Beginning Date (RBD) of the RMDs and the other due dates thereafter.

LO #2: Compare the various types of beneficiaries and how the stretch IRA is calculated for each.

LO #3: Demonstrate a comprehensive understanding of the specific requirements trusts must meet in order to be designated beneficiaries of an IRA.

LO #4: Illustrate how a conduit trust varies from an accumulation trust and describe how the stretch IRA is calculated for both. Recognize the one type of beneficiary that can be ignored in an accumulation trust and explain why.

LO #5: Apply, illustrate, and explain the income tax ramifications of RMDs received by a trust as well as RMDs received by a trust and passed through to the beneficiary.

Required Minimum Distribution: The minimum amount that must be withdrawn starting at age 70 ½ from retirement accounts such as: IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts.

IRA: An “Individual Retirement Account” that allows an individual to save money for retirement. There are three main types: Traditional, Roth, and Rollovers. Their main benefits are either tax-free growth or tax-deferment.

Roth IRA: Contributions are made to a Roth with after-tax dollars. The money then grows tax-free and will be tax-free upon withdraw in retirement assuming the 5-year aging requirement has been satisfied in addition to either the owner reaching: age 59 ½, death, or disability. Further, different from other IRAs the Roth IRAs do not require RMD withdrawals until after the owner’s death.

Designated Beneficiary: Individuals (living, breath human beings)

Non-designated Beneficiary: Non-individuals (corporations, charities, and many types of trusts)

5-Year Rule: This rule requires that, in order to take a Roth IRA distribution, 5 years must have passed since the tax year of the first Roth IRA contribution if one wants to be able to withdraw earnings tax-free.

Beneficiary Determination Date: Different from the date of death, the beneficiary determination date is September 30^th in the year after the year of death. Any beneficiaries of the account as of the date of death, whose interests are extinguished by the determination date – either by already having received the beneficiary share, or by disclaiming it – are not considered.

Irrevocable Trust: This type of trust cannot be modified or terminated without permission from the beneficiary. The grantor, by moving assets into the irrevocable trust, essentially gives up his or her rights to the assets now in the trust.

Halloween Rule: A rule stipulating that the plan administrator or IRA custodian must be provided a copy of “trust documentation” by October 31^st of the year following the year the retirement account owner died.

Conduit Trust: A trust where all post-death RMDs that are distributed from the IRA to the trust will be passed through to the trust’s (income) beneficiary and cannot be accumulated for any other subsequent beneficiary.

Accumulation Trust: The opposite of a conduit trust, where the RMDs can be accumulated inside the trust and may ultimately be distributed to some other beneficiary.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 30, 2018

In this month’s newsletter, we delve further into the longevity annuity, comparing it more directly to alternatives like immediate annuities, delaying Social Security, or simply investing in equities for the long run. We also look at some of the additional risks and caveats that longevity annuities face, both for those considering whether to purchase them, and for the annuity companies that issue them. Ultimately, the goal is to evaluate when and whether longevity annuities should be purchased for clients, and in what circumstances they can best fit as part of the retirement income puzzle.

LO #1: Define who longevity annuities might work best for and describe the material risk associated with longevity annuities.

LO #2: Be able to explain why Social Security is essentially a form of a longevity annuity and why it is superior to other longevity annuities.

LO #3: Be able to compare and contrast the Internal Rate of Returns (IRRs) on equities to those of longevity annuities and explain to a client the difference/purpose of an investment versus an insurance/risk management product.

LO #4: Understand and explain the importance of the credit quality of the insurer when reviewing longevity annuities as well as the risk to both the insured and the insurer.

LO #5: Be able to identify and explain the other risks of longevity annuities, particularly for the insurance companies.

LO #6: Explain why a retirement account may be the most favorable location to purchase and hold a longevity annuity.

Annuitant: This is the individual that receives the fixed some of money, usually for the rest of their life.

Annuity: A financial product that pays a fixed sum of money to someone, each year, usually for the rest of their life.

Longevity annuity: Sometimes referred to as a deferred income or advanced-life delayed annuity, this financial product converts a lump sum into a stream of income.

Immediate annuity: This type of annuity also converts a lump sum into a stream of income, however, it starts immediately instead of later in life.

Mortality credit: The share of the contributions from other people who did not survive.

Qualified Longevity Annuity Contract: These are purchased with pre-tax dollars, like an IRA or an employer retirement plan.

Non-Qualified Longevity Annuity Contract: These are purchased with after-tax dollars.

Risk Management: This is a term used to describe nearly any strategy that effectively handles some aspect of risk. In the case of annuities, this is often related to inflation and outliving one’s portfolio.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 9, 2018

With a rising number of baby boomers facing retirement, and a rather volatile market over the past two decades, there has been an increasing interest in the use of annuity products to provide safe and secure income in retirement – with the unfortunate caveat that the simplest options like immediate annuities have generally been unpopular, and the more complex alternatives like variable annuities with living benefit riders have been criticized that many buyers may be misunderstanding what really is and isn’t guaranteed in the first place. In the past few years, a new type of annuity solution has emerged, dubbed the “longevity annuity”, which seeks to avoid carving a large portion of a portfolio into an illiquid immediate annuity, while also avoiding the complexity of variable annuity (and more recently, equity-indexed annuity) income guarantees. In this month’s newsletter, we explore the concept of longevity annuities, what they are and how they work, and where they may fit into the retirement income puzzle (especially as a longevity hedge). In next month’s newsletter, we’ll continue in further depth into the analysis of longevity annuities, how they compare to other types of retirement income strategies and approaches, and the caveats that must be considered when trying to fit them into a retirement income strategy.

LO #1: Compare and contrast the similarities and differences between longevity annuities and immediate annuities.

LO #2: Be able to accurately list and define the three components of annuity payments.

LO #3: Explain the concept of mortality credits and illustrate how they impact the annuity payment stream.

LO #4: Accurately explain the various choices a client has when considering the purchase of a longevity annuity and illustrate how those choices may impact the payments from the annuity (i.e. impact of when payments begin and/or refund guarantees).

LO #5: Understand how the inflation-adjustment feature on longevity annuity payments works.

LO #6: Describe the how the income payments from longevity annuities are taxed.

Annuity: A financial product that pays a fixed sum of money to someone, each year, usually for the rest of their life.

Longevity annuity: Sometimes referred to as a deferred income or advanced-life delayed annuity, this financial product converts a lump sum into a stream of income.

Immediate annuity: This type of annuity also converts a lump sum into a stream of income, however, it starts immediately instead of later in life.

Mortality credit: The share of the contributions from other people who did not survive.

Qualified Longevity Annuity Contract: These are purchased with pre-tax dollars, like an IRA or an employer retirement plan.

Non-Qualified Longevity Annuity Contract: These are purchased with after-tax dollars.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• CFP / IWI (formerly IMCA) hours
• NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

For the purposes of this month’s newsletter, we will focus specifically on the tax treatment of nonqualified, deferred annuities (regardless of whether they are fixed or variable, as that does not directly impact the tax treatment).

LO #1: Explain the primary tax preference for deferred annuities still in the accumulation stage while also recognizing the caveat to this tax benefit.

LO #2: Understand and articulate the taxation of distributions from an annuity.

LO #3: Explain the tax situation that occurs when a deferred annuity is surrendered for an amount that is less than the original basis.

LO #4: Describe when post-death distributions must begin for an annuity and explain the unique complications that may result for jointly held annuity contracts.

LO #5: Be able to list and explain the distribution options for the various types of beneficiaries (i.e. spousal, non-spousal, and Trust).

LO #6: Understand the importance of knowing the rules of your client’s particular annuity contract and their annuity company prior to a death occurring.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• N/A NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 25, 2018

In this month’s newsletter, we take a deeper dive into asset location concepts and strategies, including a look at how the introduction of Roth-style accounts adds further complexity, the potential to “create” new asset location accounts (e.g., non-qualified deferred annuities) to take advantage of tax-deferral, and how viewing investments on an after-tax basis can impact not only the asset allocation itself but also the after-tax volatility of an investment that can itself further change asset location priorities. In addition, we also look at some of the practical implementation challenges, and some of the client psychology and communication issues that arise in trying to effectively implement asset location.

LO #1: Decipher which high-return investments belong in taxable versus retirement accounts based on their tax efficiency.

LO #2: Explain when and why high-return, tax-efficient investments should be placed inside a Roth IRA instead of a Traditional IRA and/or taxable brokerage account.

LO #3: Be able to describe when asset location should not be performed and why.

LO #4: Clearly illustrate why it is that an investor’s asset allocation on an after-tax basis may be materially different than their current, before-tax allocation.

LO #5: Articulate to client’s the importance of viewing assets as a household, while also mentally “accounting” for separate accounts in order to help clients overcome the psychological impact of some accounts not performing as well as others.

LO #6: Establish and maintain an asset location priority list.

Asset Location: This is the personal finance term that indicates how or that investors can distribute money across different investments, but more importantly investments with different taxation.

Taxable Account: A good example is a brokerage account, and the tax treatment for this type of account is based on what is in the account – stocks or bonds.

Tax-Deferred Account: A good example is an IRA or a 401(k), taxes are not paid when the money goes in, but are taxable as ordinary income when withdrawn, and that ordinary income treatment applies

Tax-Exempt Account: A good example is a Roth IRA or a 529 college savings plan, and these accounts grow initially tax-deferred and allow withdrawals of the growth to be tax free assuming the requirements are met.

Long-term capital gains: These can also be long-term capital losses, and different from short-term gains and losses based on taxation. For instance, long-term capital gains stem from selling an investment that has been held for longer than 12 months at the time of the sale.

Buy-and-hold: This is a passive investment strategy where once the investor purchases his or her stock, s/he then holds it for an extended period of time regardless of fluctuation in the marketplace.

Dividends: Most often paid on a quarterly basis, this is a distribution of a portion of a company’s earnings, paid to the shareholders. Dividends can be cash, stock, or other property.

Tax-efficiency: This is another way to describe an investment strategy that minimizes tax liability.

Equities: This is referring to stocks or shares of a company.

Bonds: This is a fixed-income investment. The investor loans the money and in return receives a variable or fixed interest rate in return to pay back the loan over a certain period of time.

Time Horizon: The is the length of time over which an investment can grow (or not) and is held before liquidating or selling at some point in the future.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 20, 2018

In this month’s newsletter, we explore the concept of asset location and its prospective benefits when executed well, along with examining the available research on how to make the best decisions regarding asset location when taking into account the tax treatment of the available accounts, the tax treatment of the chosen investments, and the expected risks and returns of those investments.

LO #1: Decipher between which type of account (taxable or retirement) equities and bonds, respectively, should be held in and explain why.

LO #2: Describe why equity turnover and ongoing dividends erodes much of the value of tax deferral that is normally associated with buy-and-hold strategies.

LO #3: Explain why tax efficiency doesn’t matter all that much when expected returns are low.

LO #4: Construct an asset location priority list based on high-return assets and their level of tax efficiency.

LO #5: Be able to illustrate the “outside-in” concept for building a portfolio based on asset location.

Asset Location: This is the personal finance term that indicates how or that investors can distribute money across different investments, but more importantly investments with different taxation.

Taxable Account: A good example is a brokerage account, and the tax treatment for this type of account is based on what is in the account – stocks or bonds.

Tax-Deferred Account: A good example is an IRA or a 401(k), taxes are not paid when the money goes in, but are taxable as ordinary income when withdrawn, and that ordinary income treatment applies

Tax-Exempt Account: A good example is a Roth IRA or a 529 college savings plan, and these accounts grow initially tax-deferred and allow withdrawals of the growth to be tax free assuming the requirements are met.

Long-term capital gains: These can also be long-term capital losses, and different from short-term gains and losses based on taxation. For instance, long-term capital gains stem from selling an investment that has been held for longer than 12 months at the time of the sale.

Buy-and-hold: This is a passive investment strategy where once the investor purchases his or her stock, s/he then holds it for an extended period of time regardless of fluctuation in the marketplace.

Dividends: Most often paid on a quarterly basis, this is a distribution of a portion of a company’s earnings, paid to the shareholders. Dividends can be cash, stock, or other property.

Tax-efficiency: This is another way to describe an investment strategy that minimizes tax liability.

Equities: This is referring to stocks or shares of a company.

Bonds: This is a fixed-income investment. The investor loans the money and in return receives a variable or fixed interest rate in return to pay back the loan over a certain period of time.

Time Horizon: The is the length of time over which an investment can grow (or not) and is held before liquidating or selling at some point in the future.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

December 3, 2018

Given the difficult ongoing investment environment, investors have increasingly been turning to various “alternatives” to support portfolio growth and manage risk, aided in no small part by a technological revolution that makes analytically complex strategies that would have been impossible 30 years ago, and difficult 15 years ago, easily implemented in today’s marketplace. A recent example of this trend is risk parity investing. Notwithstanding its long conceptual roots dating back to Markowitz, and favorable performance since the 1990s, risk parity investing has only really begun to gain momentum in the past few years. In this newsletter, we look at what risk parity investing really is (and what it’s not), the opportunities, risks, and practical challenges in implementing such strategies, and whether risk parity investing ultimately represents a short-term investing fad, or an emerging shift in how portfolios are constructed.

LO #1: Explain the fundamental principal of risk parity portfolios. Additionally, recognize that an even split of capital amongst many asset classes does not necessarily reduce risk.

LO #2: Describe how the use of leverage in a risk parity portfolio that is truly well-diversified may still be less risky than a concentrated portfolio in a limited number of risky assets.

LO #3: Illustrate an understanding of the proactive monitoring process that risk parity portfolios entail and why the proactive monitoring is necessary.

LO #4: Explain how the risk parity portfolios performed when backtested and why their extensive diversification may help the portfolios in rising rates and inflation but hurt in times when equities have considerable growth.

LO #5: List the caveats and concerns relevant to risk parity portfolios.

Risk Parity: Parity exposure to multiple risks; thus effectively diversifying a portfolio would mean it will hold multiple asset classes, and have the opportunity to take advantage of the returns from multiple risk premia.

Modern Portfolio Theory (MPT): An investment theory put forth by Harry Markowitz in 1952, that says risk-adverse investors can construct portfolios as to optimize/minimize their expected return based on the level or market risk they were willing to take on.

Efficient Frontier: This is the set of “optimal” portfolios based on MPT in that the portfolios along this continuum offer the highest return for a defined level of risk. Portfolios that either above or below the efficient frontier, a regression, are either too risky for the amount of return or not enough return for the amount of risk.

Volatility: Often measured in terms of standard deviation or variance, this is a statistical measure of return spread for a given market or particular security. How much does the asset’s trading price vary over time.

Diversification: A portfolio construction technique that reduces overall risk in the portfolio by incorporating investments across various industries, categories, places and financial instruments. Well diversified portfolios help to manage risk.

Risk Premia: Is notion or consideration that for a higher return (premium) there is a related level of risk.

Rebalancing: A process of periodically, and sometimes opportunistically, buying and selling assets in a portfolio to re-establish the portfolio’s desired level of asset allocation; i.e. 60/40 stocks and bonds.

Sharpe Ratio: This is the average return earned over and above, or in excess, of the risk-free rate per unit of volatility or total risk. In other words, how much more return is a portfolio receiving for the amount of extra risk (volatility) it is taking on.

Leverage: This is referring to the capital being borrowed to then make an investment. The return on the investment is or should be greater than the interest paid on the borrowed capital.

Backtest: This is a process of testing trading strategies using historical data. The goal is to see or understand the viability of a trading strategy in a similar market before using the strategy in real-time with actual capital at risk.

Asset Allocation: The process of dividing up and organizing investments within a portfolio across a wide range of asset categories; stocks, bonds, cash. This can minimize risk as well as personalize a portfolio based on goals and time horizons.

Risk Allocation: In somewhat of a contrast to asset allocation, risk allocation is an alternative method that weights assets based on their risk. Risk factors cross the asset class boundaries.

Capital Asset Pricing Model (CAPM): A theory of financial market behavior that allows investors to consider the relationship between systematic risk and the expected return of an asset. It is common to see this theory used to analyze asset pricing.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

N/A

July-August 2013 issue of The Kitces Report on the New World of Health Insurance, including the new health insurance coverage rules, the rollout of new health insurance exchanges, and the series of new tax credits and cost subsidies that will be available to those obtaining coverage on a health insurance exchange

LO #1: Explain the pros and cons of the new series of “essential health benefits” (i.e. minimum level of coverage).

LO #2: List the four standardized types of plans and describe what premiums will be based on.

LO #3: Explain the premium assistance tax credit that was established by the Affordable Care Act and how an individual (or family) can qualify for the credit.

LO #4: Describe who qualifies for the Federal cost-sharing subsidies and the subsidies will further reduce the net out-of-pocket limits and costs of health insurance plans.

LO #5: Explain, and be able to calculate, how an increase in income causes the premium assistance tax credit to be phased out and how that increases one’s marginal tax rate.

LO #6: Be able to articulate to clients how the new health insurance exchanges work and the new rules and regulations clients must now navigate.

Affordable Care Act: Signed into law on March 23^rd, 2010 by President Obama, the Affordable Care Act focused health insurance on a new series of “essential health benefits” setting a new minimum level of coverage for all.

Health Insurance Exchange: This is the marketplace where consumers can go to identify and select the health care plan that fits them best.

Premium Assistance Tax Credits: This is a tax credit that lowers a monthly insurance premium (the monthly payment). These are based on income and other household information.

Federal Poverty Level (FPL): These numbers are reassessed every January. They are based on income and household size. These calculations are then used to determine who may be eligible for different types of benefits.

Cost-sharing subsidies: This is a discount that lowers the amount an individual or a family has to pay for their deductibles, co-payments, and co-insurance. These are extra-savings on top of the Premium Assistance Tax Credits

Premium: An insurance premium is the amount of money one (individual, business, or family) must pay for having an insurance policy.

Co-payment: This is a fixed amount, for example $20, that one pays for a covered health care service AFTER you’ve met your deductible.

Co-Insurance: A little different from a co-payment, co-insurance is NOT fixed. You pay X% of the cost of the covered service AFTER the deducible has been met.

Primary care: This is basic health care, as opposed to specialized health care.

Preventative care: This is the type of up-keep or care that one can take to prevent illness or disease. Many of these services are covered at no cost.

Deductible: This is the amount that will be paid by you before the insurance company will begin to kick-in any support.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• N/A NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 25, 2018

January-February 2013 issue of The Kitces Report newsletter on the now-permanent rules for portability and the planning implications that carryover of a deceased spouse’s estate tax exemption will have on the use of bypass trusts.

LO #1: Be able to explain the “permanent” changes made to the estate tax system with the passage of the American Taxpayer Relief Act of 2012.

LO #2: Discuss why the portability of the estate tax exemption renders the bypass trust as no longer necessary as it pertains to preserving a deceased spouse’s estate tax exemption.

LO #3: Be able to identify and list the many situations in which it still makes sense to use a bypass trust.

LO #4: Describe the necessary requirements in order to elect for portability.

LO #5: Explain and list the potential significant direct and indirect costs of the decision to keep using a bypass trust.

LO #6: Help clients analyze and weight the trade-offs between adverse income tax consequences versus the bypass trust planning benefits.

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA): Signed into law on December 17^th, 2010 this act resolved the fiscal cliff and had a large impact on estate taxes.

American Taxpayer Relief Act (ATRA): Signed into law on January 2^nd, 2013 this act permanently resolved the series of estate and income tax planning sunsets.

Economic Growth and Tax Relief Reconciliation Act (EGTRRA): Signed into law in 2001 by President Bush, this was his first piece of tax legislation and a precursor to ATRA.

Deceased Spouse’s Unused Exemption Amount (DSUEA): This is the amount remaining of the $5.25M that the deceased spouse passes on to the surviving spouse.

Generation Skipping Tax (GST): This is an estate tax imposed on beneficiaries who are two or more generations removed from the testator

Bypass Trust: An estate planning vehicle that allows assets to be sheltered now and in the future from estate taxes

HEMS: This is the acronym that stands for “health, education, maintenance, and support” that is often a part of trust language allowing access to the beneficiary

Qualified Terminable Interest Property (QTIP): This is a type of trust or estate planning tool.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 9, 2018

September-October 2012 issue of The Kitces Report on “The Rising Popularity Of Hybrid Long-Term Care Policies” including an analysis of how the policies and benefits are structured, the current tax laws that apply, where and how the policies are being used, and whether they represent a “good deal” or not at the end of the day.

LO #1: Explain why there has been an increased popularity of hybrid long-term care policies.LO #2: Describe how hybrid long-term care policies are typically funded and what happens if the policy is never used.

LO #2: Describe how hybrid long-term care policies are typically funded and what happens if the policy is never used.

LO #3: Illustrate an understanding of the tax laws regarding hybrid long-term care insurance policies.

LO #4: Identify and list the embedded guarantees of hybrid life/LTC policies and compare those to hybrid annuity/LTC policies

LO #5: Be able to explain the important caveats to hybrid LTC policies.

LO #6: Account for and calculate the opportunity cost of tying up funds inside of a hybrid LTC policy as compared to investing the funds separately and using those funds to pay ongoing traditional LTC policy premiums.

LO #7: Explain who should and should not consider the purchase of a hybrid LTC policy.

Asset-based long-term care (LTC) insurance: This is a hybrid of LTC coverage and a life insurance or annuity policy, allowing for a combination of partial self-insurance and “disaster coverage” from the insurance company.

Annuity: A financial product that pays a fixed stream of payments, once annuitized, often for life to the owner of the annuity or the beneficiary.

Life insurance: A financial product that protects against financial loss resulting from the death of the insured.

Pension Protection Act of 2006: The act that changed the tax laws regarding hybrid LTC insurance policies. It became effective starting January 1, 2010.

Qualified LTC Policy: Policies that confirm tax code provisions found in IRC Section 7702B(b), which dictate requirements such as guaranteed renewability of coverage to what constitutes the services covered with policy claims.

Non-qualified LTC Policy: These policies, in contrast to qualified policies, are more liberal in regard to the policy triggers necessary to claim benefits. Another difference, these policies may treat the policy as taxable income to the client; which is never allowed under a qualified contract.

1035 Exchange: The exchange of annuity policies to other annuity contracts, and of life insurance policies to other life insurance or annuity contracts on a tax-deferred basis.

Rider: An additional provision added or attached to a contract, for an additional cost. In terms of hybrid LCT these may be related to inflation, return-of-premium riders, and living benefit riders.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 9, 2018

In this issue of The Kitces Report, we look back and review the past 20 years of safe withdrawal rate literature, in an effort to better understand the major revelations and research innovations, and arrive at some conclusions about what this entire body of research can tell us today about what is and isn’t a safe, sustainable portfolio withdrawal.

LO #1: Be able to explain what the safe withdrawal rate is, who first published the idea, how it is determined, and what assumptions are necessary.

LO #2: Show an understanding of how the safe withdrawal rate is influenced by time horizon, taxation, expenses, risk tolerance, and market valuation.

LO #3: Describe how diversification influence the safe withdrawal rate, and why it may be difficult to determine the exact amount of the influence. Discuss why asset allocation glide paths may not actually be beneficial.

LO #4: Explain how the ability, or inability, to be flexible with spending impacts the initial safe withdrawal rate.

LO #5: Clarify the impact that annuitizing a portion of a portfolio may influence the withdrawal rate. Identify the potential benefits and risks of this strategy.

LO #6: Discuss the limitations of prior research on safe withdrawal rates. Identify the many other considerations that should be accounted for when analyzing safe withdrawal rates.

LO #7: Be able to understand and evaluate the prior research on safe withdrawal rates.

Withdrawal rate: This is a calculation that details what percentage of invested assets you could or are currently spending, related to spending down savings in retirement

Annuity: This is a fixed sum of money paid each year, traditionally for the rest of the annuitant’s life.

Legacy: This is the idea that an individual would like to leave something behind, a monetary portion of their portfolio assets, for later generations or a perhaps a charity.

Market Valuation: In the simplest terms, this is the value of an asset based on the price that would or could be paid for it, if it were to be sold

Risk Tolerance: This is a measure of a client’s preference towards taking risks.

Diversification: This is a process where by a client’s portfolio would have a wide range of unrelated assets.

Time Horizon: This is the time from now to when the person retires or the person passes. Time horizon refers to now or a give point in time to the future point in time.

Glide Path: The term used to describe decreasing equity exposure over time.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 20, 2018

In this issue of The Kitces Report, we look at some of the information that was taught during the 2010 “Life Cycle Investing for Financial Planners” during July 26-28, 2010, in Boston, MA. In doing so, we attempt to understand whether and how some aspects of financial planning might be changed, or improved, by incorporating some of the life cycle finance economics perspectives.

LO #1: Be able to explain what Life Cycle Finance is and why it is important to understand as a financial planner.

LO #2: Discuss what utility and utility function are. Explain why they are important considerations in financial planning, and why humans tend to exhibit a tendency for diminishing marginal utility of consumption.

LO #3: Describe how using TIPS as a baseline strategy for optimizing lifetime consumption is an ideal strategy. Explain why someone might consider using the strategy of annuitization, and discuss how the use of options can help mitigate risk.

LO #4: Illustrate how human capital changes over time. Identify the various factors that impact a client’s human capital. Explain how financial planners can begin integrating human capital into their practices. Define total wealth.

LO #5: Discuss the implications for the financial planning profession. Identify the caveats and concerns that need to be considered under the life cycle framework.

Life Cycle Finance: The name or label for the body of economic theory, models, and research that explore how individuals should make decisions about savings, investing, and spending over their lifetimes. Over the planning horizon, individuals will make decisions about how to manage their financial wealth, and what to do with their income/earnings as received, in order to fund their spending (consumption) throughout the years.

Human Capital: In LCF, human capital represents the present value of an individual’s future lifetime earnings.

Consumption: In LCF, consumption is the present value of all future spending; I.e. a liability.

Utility: An abstract measure of how much enjoyment or good an individual derives from the decision that they make.

Utility function: This is a mathematical function that ranks choices, typically goods and services, based on an individual’s utility preferences.

Diminishing Marginal Utility: This is a term that describes individual’s tendency to feel less enjoyment the more an item, good, or service is consumed. To explain another way, as income rises higher and higher we derive less and less additional enjoyment from each additional increment of income.

Habit formation: In LCF, this is when we notice consumers reaching and preferring to sustain a certain standard of living, or maintain certain spending habits.

Loss aversion: We experience more negative feelings about a loss than positive feelings about an equivalent gain. Losing $10 hurts more than gaining $10 feels good.

Risk-free rate: The theoretical rate of return of an investment with zero risk. Treasury bills, assuming the U.S. government remains a secure borrower, are an example of a financial product with a risk-free-rate.

Annuitization: The process of converting an annuity investment into a series of periodic income payments.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 30, 2018

Many financial planners do not necessarily have a firm grasp on what tax rates are really associated with certain levels of income, and often underestimate marginal tax rates and overestimate effective tax rates. In this month’s issue of The Kitces Report, we review some of the foundations of tax principles, looking primarily through a lens towards their impact on marginal and effective tax rates. We also look at what kinds of tax rates really occur at varying levels of income.

LO #1: Be able to explain how to identify what your tax rate really is. Discuss how income tax brackets are used, and how you arrive at taxable income.

LO #2: Illustrate an understanding of marginal tax rates. Describe how you arrive at the marginal tax rate, and why there is more to them than meets the eye.

LO #3: Describe how dividends and capital gains are taxed, specifically qualified dividends and long-term capital gains. Discuss how they are applied under the tax bracket tables themselves.

LO #4: Explain how the Alternative Minimum Tax (AMT) system works. In doing so, identify the various tax rates, the exemption amounts, and discuss how capital gains and qualified dividends are treated. Show an understanding of where it is applied on the tax return.

LO #5: Estimate the marginal and effective tax rates for your clients.

Marginal Tax Rate: Is the tax rate that will apply – at the margin – to the next $XX of income that the client earns, and/or the tax rate will be saved with the next $YYY of deductions.

Tax Bracket: This refers to the tax rate tiers that apply under the tax code at increasing levels of income.

Progressive Tax System: This is the style of tax system where those with higher income pay a higher percentage share of taxes.

Gross Income: Defined in IRC Section 61, Gross income is all income from whatever source derived [except as otherwise provided by the tax code]

Adjusted Gross Income: This is the income left over after eligible income types and sources have been excluded, and the negative economic adjustments have been made to account for income that wasn’t really received/earned/made.

Above the Line Deduction: These deductions are taken deducted or excluded when determining AGI

Below the Line Deduction: These are the deductions taken from AGI, after it has been determined in order to calculate one’s final taxable income

Alternative Minimum Tax (AMT): This is a supplemental income tax imposed by the federal government which is required in addition to income tax for some individuals, trusts, estates, or corporations

Capital Gains: These are the profits from the sale of property or an investment

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 25, 2018

In this month’s newsletter, we explore the necessary analytical framework to understand when and in what situations it may be more effective to contribute to a Roth IRA versus a traditional IRA and vice versa. By developing a series of rules and evaluating certain known exceptions to those rules, and by exposing certain myths along the way, planners can more clearly evaluate when a Roth IRA contribution (or conversion) may or may not be effective for a particular client situation, to maximize long-term wealth accumulation.

LO #1: Explain the basic tax rules of a Traditional IRA, a Roth IRA, and of Roth IRA conversions. Be able to explain to a client the situations in which they can withdrawal from a Traditional IRA penalty and tax-free. Calculate the amount a client can contribute to their IRAs, and explain why contribution totals are taken together.

LO #2: Be able to compare and contrast a Roth IRA versus a Traditional IRA. Illustrate when it might make sense for a client to utilize a Roth Conversion strategy. Describe the “tax equivalency principle”.

LO #3: Explain the exceptions to the Roth conversion/tax equivalency principle rules.

LO #4: Discuss how your client can apply the rules and exceptions as mentioned in this newsletter. Explain why forecasting future tax rates is important.

LO #5: Identify the strategies your clients can use to implement the rules around the decision to contribute to a Roth IRA versus a Traditional IRA, and whether or not to convert to a Roth IRA from a Traditional IRA.

Individual Retirement Account (IRA): This is a tax-deferred retirement plan, meaning the individual does not pay taxes when the money goes in, but when the money comes out it is taxed as regular income.

Roth IRA: A compliment to the IRA, the Roth IRA is an after-tax savings vehicle. Taxes are paid when the money goes into the Roth IRA, but earnings on the account and withdrawals from the account after age 59.5 are tax-free.

Roth Conversion: This is a process where by a traditional IRA is converted into a Roth IRA. In order to do this you then pay the taxes on the money earned as well as on contributions originally deducted on your taxes.

Roth IRA Re-conversion: The goal of a re-conversion is to minimize tax burden. This process re-characterizes a Roth IRA-converted, back to the traditional, and then back again to the Roth.

Required Minimum Distribution (RMD): This is the minimum amount that must be withdrawn from an account: IRA, SEP IRA, SIMPLE IRA, ect. once you have reached age 70.5. However, this does not apply to Roth IRAs, which only required distributions once the owner has passed.

Estate tax: This is a tax on the net value of a deceased person’s estate.

Income in Respect of Decedent (IRD) Deduction: IRD deductions apply to beneficiaries. After the decedent has passed, but paid federal estate taxes on IRD assets, then the beneficiary can apply for a deduction on the estate taxes.

Tax liability: This is the tax debt, or amount, owed to the IRS.

Adjusted Gross Income (AGI): This is the measure of income calculated from your gross income and used to determine how much of one’s income is taxable.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

N/A

In this month’s newsletter, we explore the types of financial planning fees that are and are not deductible, the ways in which fees can be paid and how it affects their deductibility, and some unique tax complications that can arise as financial planning fees are paid. In a separate section at the end of the newsletter, we also cover some recent developments on the 2009 waiver of required minimum distributions and changes to the rules for non-spouse beneficiary rollovers from employer retirement plans in 2010.

LO #1: Explain the technical rules for deducting payments for advice. Be able to identify the three prongs of IRC Section 212 and understand what does and does not qualify as a deductible financial planning-related expense.

LO #2: Identify the three methods in which you can go about allocating payments for advice and discuss when it makes sense to do each of the methods.

LO #3: Describe what the limitations of the deduction are, who is impacted, and why there is no tax downside to claiming the maximum possible fee deduction.

LO #4: Illustrate an understanding of the additional issues regarding retirement accounts, specifically the rules around which accounts can be used to pay for planning fees. Define what a prohibited transaction is.

LO #5: Identify which types of accounts were affected by the waiver of RMDs for 2009 via the Worker, Retiree, and Employer Recovery Act (WRERA) of 2008. Explain how the wavier affects the 5-year rule. Discuss who the wavier will not affect.

2% of Adjusted Gross Income (AGI) Floor: The 2% rule says a tax-payer is only allowed to deduct the portion of miscellaneous expenses that exceed 2% of their adjusted gross income.

Section 212: IRC code section entitled “Expenses for the Production of Income” and it outlines three subsections that define what is and is not deductible related to financial planning and other services.

Alternative Minimum Tax (AMT): A additional tax placed on certain individuals, corporations, estates, and trusts that may have an exemption or special circumstance, loophole, to avoid taxes on standard income.

Required Minimum Distribution (RMD): This is the minimum amount that one must withdrawal from an IRA, excluding Roth IRAs, each year.

5-year rule: Refers to the rule stipulating that the annuity must be liquidated by the 5^th anniversary of the owner’s death.

Qualified plans: These include all types of defined contribution plans (401(k)s, profit-sharing, ect.), as well as 403(b) and governmental 457(b) plans.

Roth IRA: An Individual Retirement Account is a savings vehicle that provides a tax-break. In contrast the to the traditional IRA (tax-deferred growth) the Roth IRA uses after-tax dollars (taxes have already been paid) and then the money grows tax-free is and is tax-free upon withdraw at retirement.

IRA: An Individual Retirement Account is a savings vehicle that provides a tax-break; they provide tax-deferred growth until the assets are withdrawn.

Net Asset Value (NAV): This is the calculation for determining the value of a mutual fund; deduct the fund’s liabilities from its market value and then divide by the number of issued shares.

C-share Mutual Fund: A special type of mutual fund with a level load; often small back-end loads. The loads are generally around 1% and fall off once the mutual fund has been held for a year.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP hours
• N/A NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 3, 2018

In this month’s newsletter we explore what economic value is (and is not) created by a tax loss harvesting transaction, as well as the complications, costs, and risks that arise when seeking to harvest tax losses.

LO #1: Understand the basic rules for tax loss harvesting, and explain the benefits of doing so.

LO #2: Discuss what a “Wash Sale” is, and identify any practical issues with, and other complications of, a wash sale.

LO #3: Describe the value of a harvested loss. Understand when value is created (or not created). Be able to measure the value of a harvested loss.

LO #4: Illustrate how to weigh the benefits of loss harvesting, and identify the three major costs/risks that must be taken into account when weighing the benefits.

LO #5: Recognize the major factors necessary to establish rules for loss harvesting.

 LO #6: Identify special situations and exceptions that may arise and be able to distinguish how to proceed should these special “factors” arise.

 LO #7: Be able to integrate all of the considerations factors discussed within the newsletter to create process/decision framework in which to implement with your clients.

Tax Loss Harvesting: The deliberate sale of a security that has experienced a loss in value, in order to realize or “harvest” the loss and offset taxes.

Wash Sale: A wash sale has occurred when a “substantially identical security” has been purchased either within, before, or after 30 days of having sold or traded a security at a loss.

Loss threshold: The minimum amount of expected annual economic gain that makes a tax loss harvesting transaction worthwhile

Transaction costs: These are the fees and expenses incurred when buying and selling securities. These may include brokers’ commissions, bid/ask spreads, and trading platform fees. In a TLH situation these should be considered as 4 transactions will be necessary to complete the process.

Substantially identical: The original wash sale rules were written in the context of “traditional” securities such as stocks and bonds, and extensive guidance has been provided to determine which of these are “substantially identical”. However, “substantially identical” is less clear when it comes to pooled investments.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 25, 2018

In this month’s newsletter we will explore in greater depth exactly what risk tolerance is and what we’re trying to measure, how it fits in with other aspects of a client’s overall risk profile, and to consider what’s required to truly design a quality measurement of risk tolerance.

LO #1: Describe the current and new risk tolerance paradigms. Differentiate between the two and discuss similarities.

LO #2: Distinguish risk capacity from risk attitude. Explain why it is important to do this under the new risk tolerance paradigm and how it influences portfolio, and goal, creation.

LO #3: Define what risk perception is. Explain how, and why it is constantly changing. Describe how behavioral finance has been incorporated into the world of finance. Define what heuristics is, and identify the common behavioral finance heuristics as they relate to risk perception in particular.

LO #4: Explain how risk attitude, capacity, and perception are integrated with each other to influence a client’s overall risk profile.

LO #5: Identify problems associated with risk tolerance questionnaires, explain how psychometrics can help improve such questionnaires, and discuss alternative approaches to measuring risk tolerance.

LO #6: Illustrate how you can utilize this information to create your client’s risk profile.

Risk tolerance: This is a conflated measure of a client’s ability to withstand risk.

Risk capacity: This determines how much risk a client can afford to take, how much risk a client would be required to take to achieve the specified goal, and indirectly reveals whether the risk in the portfolio should be driven by a need for risk or by the client’s decision to take more or less.

Risk attitude: This is or could be considered an upper limit of acceptable risk in the portfolio, above which the client’s portfolio should not roam.

Risk perception: This is the wildcard of the client experience. It operates independently of the client’s underlying risk attitude, causing them to potentially misjudge whether the risk they’re actually taking is more or less than they intended.

Heuristic: These are mental short-cuts that individuals use to make decisions faster.

Availability heuristic: When a person uses the most “available”: convenient, easy, most accessible information.

Overconfidence: When a person prefers to credit themselves for success, but not take the same responsibility for failures.

Loss aversion: When a person experiences a loss (loses $10 dollars) then hurts more than it feels good to have a success (find $10 dollars).

Familiarity: When a person prefers to use the information that they are most comfortable with when make a decision. We like when things are familiar.

Recency: When a person weighs more heavily recent events, over older events.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 30, 2018

This month we review the November 2018 blog posts, specifically the following four: (1) Coordinating Contributions Across Multiple Defined Contribution Plans, (2) Building the Five Pillars of SEC Cybersecurity Requirements As A (Registered) Investment Advisor, (3) End-of-Year Medicare Planning Opportunities During the Open Enrollment Period, and (4) End-of-Year Contribution and Distribution Planning for Tax-Favored Accounts.

LO #1: Identify the two largest limitations of multiple retirement plan coordination, and be able to identify best-practices for helping clients (or yourself) organize retirement plan contributions across multiple plans.

LO #2: Identify the ways in which NIST framework applies to a financial planning practice.

LO #3: Identify actionable steps financial advisors can to take to secure their financial planning practice.

LO #4: Identify the ways in which advisors can help clients to make decisions about their healthcare.

LO #5: Identify the various end-of-year strategies related to helping clients decrease tax liabilities.

Salary (elective) deferral limit: Also referred to as the 402(g) limit, this limits salary deferrals for most retirement plans.

Overall limit: Also referred to as “annual additional limit” or the 415(c) limit, is a cap on all contributions made to a single plan on behalf of the participant for a given year.

Controlled group: According to IRC Section 1563, there are three types of controlled groups: parent-subsidiary, brother-sister, and combination controlled groups. These are groups of related employers based on rules.

Affiliated service group: In contrast to the “controlled groups,” Affiliated service groups are outlined in IRC Section 414(m) and are far more complex due to designation being a result of “principals-based factors.”

National Institute of Standards and Technology (NIST): They are they entity that all government agencies and large corporations look to for guidance on cybersecurity.

Medicare Open Enrollment Period (OEP): Also referred to as the Annual Election Period (AEP), this is the time when those on Medicare can make changes to their coverage, not allowed at other times of the year.

Qualified Charitable Distribution: This is a specific type of charitable gift allowing individuals to give money from their IRAs without adding taxable income that would inflate their adjusted gross income.

Required Minimum Distribution: This is the amount that traditional, SEP, or SIMPLE IRA owners and/or qualified plan participants must begin to withdrawal from their retirement accounts starting at age 70 ½.

Individual Retirement Account (IRA): This is a tax-deferred personal retirement plan. Money is put into the IRA pre-tax and only taxed upon being withdrawn as regular income.

Roth IRA: This is an after-tax plan. Money is put into the account after being taxed. However, when it is withdrawn it is done so tax free after age 59 ½.

Qualified Longevity Annuity Contract (QLAC): This is a deferred annuity, in contrast to an immediate annuity, funded with an IRA or a qualified retirement plan.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 2.0 CFP hours
• 3.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 6, 2018

This month we review the October 2018 blog posts, specifically the following five: (1) How Birth Year Shapes A Generational Experience in Stock Market Investing, (2) Using Qualified Opportunity (Zone) Funds to Minimize Capital Gains, (3) Getting Real About (Annual) Health Care Costs in Retirement, (4) When Clients “Need” More Risk Than They Can Tolerate: Adjusting Portfolios, or Goals?, and (5) How Do You Actually Create a Steady Retirement Paycheck From a Volatile Retirement Portfolio?

LO #1: Identify the ways in which generational trends and early-years’ experience with investing shape actual investment behavior.

LO #2: Identify the benefits and additional considerations of investing in a Qualified Opportunity Zone

LO #3: Identify why recent health care costs, although still high, may actually not be so bad for clients. Identify client communication strategies and planning strategies for health care costs.

LO #4: Identify the different ways advisors work with clients when it comes to the intersection of risks and goals. Be able to identify ways in which to work with clients to adjust goals.

LO #5: Identify strategies for creating and delivering “paychecks” in retirement. Be able to identify the benefits of creating a Withdrawal Policy Statement.

Spending Rate: A more useful measure than the savings rate, it is determined by putting “spending” over “income”.

Tax Cuts and Jobs Act (TCJA) of 2017: Signed into law on December of 2017 by President Donald Trump, this was the largest re-write of the Federal Tax Code in more than 30 years.

Qualified Opportunity Zones: Geographically, low-income areas where investor’s have been granted special tax benefits.

1031 Exchange: This is a process by which a taxpayer can defer paying capital gains and federal income tax through the exchange of certain types of property.

Medicare Part B: This covers doctor and outpatient visits and associated services which could include: preventative care, X-rays, ER services, mental health and others.

Medicare Part D: This is prescription drug coverage that helps to lower costs of prescription drugs, and protect against higher costs

Income Related Monthly Adjustment Amount (IRMAA): This is the premium that some individuals and households need to pay for Medicare parts B and D, based on income.

Medigap: These are various private health insurance plans sold to supplement Medicare plans

Risk Tolerance: This is a measure of a client’s willingness to withstand risk

Investment Policy Statement: This is a document between the advisor and the investor that details both general and specific investment goals as they relate to the investor, as well as objectives and strategies.

Withdrawal Policy Statement: This is the document between the advisor and the investor that details general and specific information about how the client will receive his or her money in retirement and other account considerations.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 2, 2018

This month we review the September 2018 blog posts, specifically the following four: (1) Why (Prudent) Spending Matters More Than Savings Rates, (2) Direct Real Estate Investing And Claiming The Section 199A Qualified Business Income (QBI) Deduction, (3) Advising Clients on Becoming Reimbursed As Family Caregivers Under Medicaid’s “Cash And Counseling” Program, and (4) The Section 199A Tax Benefits Of REITs Over Direct Real Estate Investments.

LO #1: Identify the importance of spending rates and be able to calculate them.

LO #2: Identify how to calculate and qualify for the QBI deduction.

LO #3: Identify the process and best practices for implementing “Cash and Counseling”.

LO #4: Identify the client benefits and practice for taking advantage of Section 199A Tax Benefits.

Spending Rate: A more useful measure than the savings rate, it is determined by putting “spending” over “income”.

Activities of Daily Living (ADL): There are six basic tasks: eating, bathing, getting dressed, toileting, transferring, and continence.

Medicare: The Federal health insurance program for individuals 65 and older. In some cases, younger individuals with disabilities also qualify.

Medicaid: Federal health insurance, run at the state level, for low-income families. This helps to cover medical visits and long-term medical care.

Personal Care Attendant (PCA): These individuals assist with daily tasks of the person they are providing care for, in life, in hospice, rehabilitation, or recovery.

Cap Rate: A calculation used in wage-and-property tests, it is net operating income divided by current market value.

Real Estate Investment Trust (REIT): Established in the 1960s, they are companies that receive special tax treatment.

Master Limited Partnership (MLP): This is a type of limited partnership that is publicly traded. It has the tax benefits of a limited partnership but can offer stocks and bonds.

Publicly Traded Partnership (PTP): An MLP is an example of a PTP, this is essentially an organization owned by two or more owners that is regularly traded on an established securities market.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

September 7, 2018

This month we review the August 2018 blog posts, specifically the following five: (1) How Small Business Owners Overvalue 401(k) Plan Tax Deferral, (2) RUFADAA And The Importance of Digital Estate Planning, (3) Why the Best P&C Insurance Deductible Is Driven By The Pseudo-Deductible Threshold For Filing A Claim, (4) Proposed Regulations Refine Definitions For Specified Service Businesses Eligible For QBI Deduction, and (5) How To Give Better Financial Advice That (Actually) Sticks.

LO #1: Identify and distinguish between small business retirement strategies.

LO #2: Identify RUFADDA and the way it impacts client’s estate plans.

LO #3: Identify planning strategies for property and casualty insurance.

LO #4: Identify the latest IRS Proposed Regulations for the QBI deduction.

LO #5: Identify factors that help to increase client compliance.

Qualified Plan:  A retirement plan established by an employer; these can be defined-contribution or defined-benefit.

Defined-Contribution: A retirement plan where the employer, employee or both can make contributions.

Defined-Benefit: A retirement plan where the employee’s pension is calculated based on length of service and salary.

Roth-Style or After-Tax: Contributions are not deductible when made (funded with after-tax dollars), but ultimately are tax-free when distributed.

Traditional or Pre-Tax Accounts: Provide a tax deduction for contributions (pre-tax going into the account), but ultimately tax the distribution.

Highly Compensated Employee: Based on IRS rules, a HCE is someone who earns more than 120k a year, owns more than a 5% stake in the company, or are in the top 20% of earners at the firm.

Digital Asset: Anything that’s stored in electronic form but separate from the physical hardware on which that electronic data lives.

Terms-of-Service: What the website or service is governed by, which is very different than property law. Upon the death or incapacitation of the account’s owner, the TOS do not say that the website or service must help the survivors or care-givers to get access to the owner’s information and digital assets.

UFADAA: Approved on July 16, 2014 by the Uniform Law Commission, sought to give various rights with respect to digital assets, such as access and control, to potential fiduciaries who might need those rights to execute their duties, such as executors, guardians, trustees, and powers of attorney.

RUFADDA: Revised UFADDA, approved on July 15, 2015, is a compromise between big tech companies and the earlier versions of UFADDA and PEAC Act.

Bonus-Malus: Insurance companies evaluate an insureds’ future risk profiles in part based on the tendency of the policyholders to make claims, which is what creates some uncertainty about making claims when not at the extremes

Pseudo-deductible: Refers to the true-dollar amount of a loss one would need to experience before deciding to actually make a claim (above and beyond just the stated deductible itself).

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 2.0 CFP / IWI (formerly IMCA) hours
• 3.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

8/6/2018

This month we review the July 2018 blog posts, specifically the following four: (1) The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners, (2) Determining The ROI Of Eliminating Private Mortgage Insurance (PMI) With Principal Prepayments, (3) Maximizing The “Still-Working” Exception To Delay RMDs From A 401(k) Plan, and (4) Financial Advisor Trends in Constructing Mutual Fund Vs ETF Investment Portfolios.

LO #1: Identify the hierarchy of tax-preferenced savings vehicles.

LO #2: Identify long-term considerations for the ROI of eliminating PMI.

LO #3: Identify when borrowers may be subject to PMI.

LO #4: Identify how an individual is determined to be still working for the purposes of delaying RMDs from a 401(k) plan.

LO #5: Identify factors advisors view as most important for selecting fund providers.

Health Savings Account (HSA): A triple-tax-preferenced health savings account that receives the most favorable tax treatment possible, assuming that distributions are ultimately used to pay medical expenses.

Traditional Retirement Accounts: Retirement accounts which receive a tax deduction upon contribution, grow tax-deferred, and then distributions are taxed.

Roth Retirement Accounts: Retirement accounts which do not receive a tax deduction upon contribution, but which grow tax-deferred and distributions come out tax-free.

Basic Tax-Deferred Growth: The types of tax-deferred growth which are available outside of tax-preferenced retirement accounts, such as buy and hold tax deferral and the use of non-qualified deferred annuities.

Non-Qualified Deferred Annuities: A form of annuity which does not receive a tax deduction upon contribution and growth is taxed upon distribution, but which does receive tax-deferral in the interim.

Private Mortgage Insurance (PMI): A form of insurance designed to protect a lender in the event that the lender needs to foreclose on a property and it has declined in value.

Mortgage Insurance Premium (MIP): Similar to private mortgage insurance (PMI) but typically applies to FHA and other governmental loans including reverse mortgages.

Still-Working Exception: An exception provided under IRC Section 401(a)(9)(C)(i)(II) which states that a required beginning date of taking mandatory distributions can be delayed beyond April 1 of the year after the calendar year in which the employee retires.

5-Percent Ownership Test: A test used to determine whether an individual is still working for the purposes of delaying RMDs under the still working exception. An individual is not eligible for the exception if they own more than 5% of the they are employed by.

Exchange-Traded Funds: Pooled investment vehicles that trade intraday through the stock market.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

7/23/2018

This month we review the June 2018 blog posts, specifically the following five: (1) Should A Financial Plan Really Be Boiled Down To An Index Card Of Advice?, (2) Universal Life Insurance Funding Strategies: Optimizing Death Benefit vs Cash Surrender Value IRRs, (3) Financial Advisor (And Other Specified Services) Business Entity Choices To Maximize QBI Deductions, and (4) QBI Deduction Strategies For High-Income Financial Advisors (And Other Small Business Owners).

LO #1: Identify aspects of a traditional financial plan to be reproduced in a one page financial plan.

LO #2: Identify cost-of-insurance charges and how they affect death benefit and cash surrender value of universal life insurance.

LO #3: Identify strategies to maximize the internal rate of return of death benefit or cash surrender value of universal life insurance.

LO #4: Identify the effects of different business entity structures for QBI deductions for financial advisors and other specified service small businesses.

LO #5: Identify strategies for financial advisors and other small businesses in or beyond the phase out income range for QBI deductions.

Cost of Insurance Rate: Probability of the event being insured happening, e.g., probability of death.

Net Amount at Risk: The difference between the death benefit and the cash value.

Cost of Insurance: Cost of insurance rate multiplied by the net amount at risk.

Actuarial Present Value of of a premium payment: the value of the future premium discounted by the rate of return of the alternative investment multiplied by the probability of survival.

Internal Rate of Return: rate of discount that results in a net present value of zero for a cash flow sequence.

Cash Surrender Value: difference between the cash value of an insurance and the surrender charges to terminate the policy.

Modified Endowment Contract (MEC): a tax qualification of a life insurance policy whose cumulative premiums exceed federal tax law limits.

Guideline Premium Test (GPT): test used to determine whether an insurance product can be taxed as insurance rather than as an investment.

Cash Value Accumulation Test (CVAT): another test used to determine whether an insurance product can be taxed as insurance rather than as an investment.

TCJA: Tax Cuts and Jobs Activity

QBI: Qualified Business Income

Specified service business: any business in which the principal asset of the business is the skill or reputation of one or more of its employees

Threshold amount: Income limit defined by the IRS that allows a business owner to have a QBI deduction on her taxes.

Marginal income tax rate: proportion paid in taxes for an additional dollar of income.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 2.0 CFP / IWI (formerly IMCA) hours
• 3.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

7/23/2018

This month we review the May 2018 blog posts, specifically the following five: (1) How “Ownership” Of A Client Relationship Influences Financial Advisor Behavior, (2) GDPR Compliance Rules For Financial Advisors Engaged In Digital Marketing, and (3) Why “Endowment-Style” Donor-Advised Funds Should Be Allocated More Aggressively.

LO #1: Identify the effects of non-solicitation and non-competition agreements in the financial services industry.

LO #2: Identify the compliance requirements of the EU General Data Protection Regulation for US financial advisors.

LO #3: Identify the implications of violating GDPR compliance rules for US financial advisors.

LO #4: Identify differences of distribution needs from endowment funds based on objectives.

LO #5: Identify asset allocation implications for endowment funds.

Property rights: Set of rules that determines who owns an economic good or resource and has the right to use it, transfer it, destroy it, earn income from it, and exclude others from it.

Tragedy of the commons: situation where a resource or good with common access is overexploited, sometimes to its depletion, by individuals maximizing their own benefit without taking into account their impact on the collective.

Human Capital: Set of knowledge and skills accumulated by an individual to perform activities, such as a job.

Broker Protocol: Agreement among firms that facilitates financial advisors to switch firms and take clients with them.

GDPR: General Data Protection Regulation.

Cookie: instrument that allows websites to track user information from their visitors.

Data controller: the person or company who uses the data for business purposes.

Data processor: the person or company who stores the data.

Opportunity cost: the loss of potential gain from other alternatives when one alternative is chosen.

DAF: Donor-Advised Fund, a charitable contribution mechanism that allows a donor to advise to certain extent how the funds should be invested and later disbursed to a charity.

Monte Carlo analysis: Simulation used to model the probability of different outcomes that cannot be easily predicted duo to the intervention of random variables.

Safe withdrawal rate: Percentage rate that when applied to the initial portfolio determines an amount that can be withdrawn every period corrected by inflation without depleting the funds before the horizon of the investment.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

9/20/18

This month we review the May 2018 blog posts, specifically the following five: (1) Prohibited Transaction Rules That Can Disqualify A Self-Directed IRA, and (2) Proactive Section 199A Deduction Strategies For Small Business Owners.

LO #1: Identify transactions that can disqualify a self-directed IRA.

LO #2: Identify consequences of a prohibited transaction for a self-directed IRA.

LO #3: Identify income reduction strategies to increase tax deductions for small businesses after the TCJA.

LO #4: Identify business structure decisions that can increase tax deductions for small businesses after the TCJA.

Disqualified person: Individual or entity who is prohibited from commingling the financial interests of the IRA itself with their own.

Prohibited transaction: Any direct or indirect transaction defined under IRC Section 4975(c)(1) between the IRA account and a disqualified person.

Disqualify an IRA: Remove the tax-deferred status from the IRA.

Advisory fee: A fee paid by investors charged by investment companies to make investment decisions and giving financial advice.

Financial planning fees: A fee paid by clients to financial advisors for a financial plan.

TCJA: Tax Cuts and Jobs Activity

QBI: Qualified Business Income

Specified service business: any business in which the principal asset of the business is the skill or reputation of one or more of its employees

Threshold amount: Income limit defined by the IRS that allows a business owner to have a QBI deduction on her taxes.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

5/21/2018

This month we review the April 2018 blog posts, specifically the following four: (1) Why Households with Significant Debt Tend Not to Pay it Down, (2) 2018 Roth Conversion Planning After the Tax Cuts and Jobs Act, (3) Understanding TWR vs. IRR Return Calculation Methodologies in Performance Reporting Software, (4) The Problem with Benchmarking to Financial Planning Goals: Investor Results vs. Advisor Results

LO #1: Identify the issues of benchmarking.

LO #2: Identify and examine the different assumptions of the different ways a portfolio return can be calculated.

LO #3: Identify which portfolio return calculation makes the most sense for your situation.

LO #4: Identify the impacts resulting from Congress having passed Tax Cuts and Jobs Act.

LO #5: Identify strategies and concerns for clients in regard to the future use of Roth conversions.

LO # 6: Identify the way in which debt impacts a client’s resulting financial decision-making

Mental Accounting: The way individuals mechanically and predictably categorize assets, transitions and other financial information – which is often opposite of how they “should” think about financial information.

Bar Bell Strategy: Similar to a bond barbell strategy, one conversion will be done early and one conversion later in the year.

Tax Cuts & Job Act (TCJA): Passed on December 22^nd of 2017 this major tax reform closed the “loophole” on Roth recharacterizations. The TCJA eliminated the recharacterization of Roth IRA conversions made in 2018 or later.

Roth Conversion: This type of transaction can take place when the client has money in a traditional IRA and s/he decides to move it into a Roth IRA. The decision to make this move is based on when the client will be able to pay the least amount of taxes. When they put the money in or when they plan to take the money out.

Roth IRA: Like a traditional IRA, this is still an individual retirement account. However, instead of being taxed when the money comes out, Roth IRAs pay tax when the money goes in. Then, later, when the money comes out is not taxed, assuming withdrawals begin after 59 ½ and all growth in the account avoids taxation.

Roth recharacterization: Originally created to “undo” a Roth conversion for someone who later discovered they were over the conversion income limit.

Benchmarking: A standard by which other things can be measured or judged, and in the investment context a benchmark is used to evaluate advisor performance.

Basic rate of return: This is the total amount of growth divided by the initial account balance and it provides a simple, but not always accurate, measure of investment growth.

Time-weighted return: Measures the results of your overall investment strategy, model, or allocation, as it is applied to the portfolio.

Dollar-weighted rate of return: A more accurate measure of actual investment growth and results relative to the dollars that were invested both upfront and along the way.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

April 16, 2018

This month we review the March 2018 blog posts, specifically the following four: (1) Capital Gains Strategies For Highly Appreciated Investments After A Big Bull Market Run, (2) How Healthcare Sharing Programs Compare To Traditional Health Insurance, (3) Financial Planning Research Highlights From The 2018 CFP Board Academic Research Colloquium, and (4) The Favorable Tax Treatment Of Financial Advisor Commissions Over Fees After TCJA.

LO #1: Identify strategies for managing capital gains after a big bull market run.

LO #2: Identify differences between healthcare sharing programs and traditional insurance.

LO #3: Identify ways in which statistical decision aids can be misused.

LO #4: Identify how financial advisor commissions receive favorable tax treatment after TCJA.

LO #5: Identify factors advisors prioritize when making portfolio allocation recommendations.

Capital Gain: The value above the cost basis someone receives after the sale of an asset.

Capital Loss: The value below the cost basis someone receives after the sale of an asset.

Medicare surtax: Tax rate of 3.8% applied on investment income or the modified adjusted gross income above certain thresholds.

Call option: Investment vehicle that gives the holder the option to buy something, usually stocks, at a certain price.

Put option: Investment vehicle that gives the holder the option to sell something, usually stocks, at a certain price.

Monthly share: Healthcare sharing term equivalent for premium.

Eligible event: Healthcare sharing term equivalent for claim.

Incident: Healthcare sharing term equivalent for claim.

Illness: Healthcare sharing term equivalent for claim.

Personal responsibility: Healthcare sharing term equivalent for deductible.

Annual Household Portion: Healthcare sharing term equivalent for deductible.

Annual Unshared Amount: Healthcare sharing term equivalent for deductible.

Explanation of Sharing: Healthcare sharing term equivalent for Explanation of Benefits.

Monte Carlo Analysis: Simulation used to model the probability of different outcomes that cannot be easily predicted duo to the intervention of random variables.

Heuristic: based on experimentation, evaluation, or trial-and-error methods.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 2.0 CFP / IWI (formerly IMCA) hours
• 3.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

3/16/2018

This month we review the February 2018 blog posts, specifically the following four: (1) Why Good Financial Behavior Isn’t Achievable Until You Believe That It Is, (2) Understanding The New Pass-Through Business Deduction for Qualified Business Income, (3) New Medicare Premium Surcharge Tier And Other Tax Implications Of The Bipartisan Budget Act of 2018, (4) Is College Most Valuable To Those Who Would Likely Be Successful Without It Anyway?

LO #1: Identify why self-efficacy differs from outcome expectancy.

LO #2: Identify how one might foster self-efficacy development in financial client relationships.

LO #3: Identify ways in which the Qualified Business Income deduction may apply to client’s individual situations.

LO #4: Identify tax consequences of the Bipartisan Budget Act of 2018.

LO #5: Identify the different ways in which higher education may be a benefit or a drawback.

Self-efficacy: One’s expectations of their ability to engage in a particular behavior, which is distinct from one’s expectations about the outcome of that behavior.

Outcome expectancy: A person’s estimate that a given behavior will lead to a certain outcome.

Positive Psychology: A domain of psychology dedicated to studying what makes people flourish, rather than focusing on mental illness.

PERMA: A framework outlined by Dr. Martin Seligman, the father of positive psychology, that posits that Positive emotion, Engagement, Relationships, Meaning and Achievement promote well-being.

Performance Accomplishments: Refers to the way in which we learn from our successes and failures in attempting a given task.

Vicarious Experience: Refers to the way in which we model our behaviors after those around us.

Verbal Persuasion: Refers to the way in which humans can motivate and influence one another – “You can do it. I believe in you”

Emotional Arousal: Refers to the ways in which our emotions can influence our confidence in our ability to be successful. Emotional arousal can either increase or decrease one’s self-efficacy.

Qualified Business Income Deduction: This deduction allows pass-through businesses to deduct up to 20% of their own net income against that income, effectively making them taxed on only 80 cents of each dollar they earn.

Qualified Business Income: The net income of the pass-through businesses after all business deductions have been claimed.

Medicare Modernization Act: A federal law passed in 2003, over-hauling Medicare with its most notable feature being entitlement benefits for prescription drugs; I.e. Medicare Part D prescription drug coverage, funded through high-income Medicare enrollees

Income-Related Monthly Adjustment Amount (IRMAA): The surcharges paid by high-income Medicare enrollees, based on Modified Gross Income.

Bipartisan Budget Act of 2018: The new law passed on Friday, February 9^th to avoid government shutdown, not only increased government spending and raised debt ceiling for two years, a number of tax provisions were also added.

Human Capital Theory: Developed by Gary Becker and Jacob Mincer – it is a theory that organizes and explains why people would choose to invest in themselves (going to college) in order to make themselves more competitive and therefore profitable in the labor market.

Signaling Theory: Developed by Michael Spence – it is a theory about how people (potential employees and potential employers) communicate their value to one another. Individuals use “signals” to tell other individuals that they possess traits that may or could be valuable (intelligence, work ethic, ect.).

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

2/19/2018

This month we review the January 2018 blog posts, specifically the following five: (1) When It Pays To Pay Social Security Taxes, (2) Managing The “Theater” Of Financial Planning, (3) Acquisition And Home Equity Mortgage Interest Tax Deductibility After TCJA, (4) Do Losses Truly Loom Larger Than Gains, and (5) Timing Tax Savings With Deduction Lumping And Charitable Clumping.

LO #1: Identify circumstances in which the ROI on paying FICA taxes is higher.

LO #2: Identify ways in which an advisor’s personality may be signaled through their office.

LO #3: Identify tax deductibility of interest from mortgage and home equity indebtedness after TCJA of 2017.

LO #4: Identify why losses may not truly loom larger than gains.

LO #5: Identify how deduction lumping can increase total tax deductions.

FICA Taxes: Payroll taxes comprised of 6.2 percent Social Security tax and 1.45% Medicare tax.

Income Replacement Tier: Also known as “Social Security Bendpoints”, the points at which an individual’s income is replaced at a higher/lower level.

Earnings History: Amount of quarters in which an individual had sufficient earnings to earn credit for Social Security purposes.

Openness: Big Five personality trait which includes characteristics such as creativity and intellect.

Conscientiousness: Big Five personality trait which includes characteristics such as industriousness and orderliness.

Extraversion: Big Five personality trait which includes characteristics such as enthusiasm and assertiveness.

Agreeableness: Big Five personality trait which includes characteristics such as compassion and politeness.

Neuroticism: Big Five personality trait which includes characteristics such as withdrawal and emotional volatility.

Behavioral Residue: Ways in which evidence of one’s behavior accumulates within their environment.

Acquisition Indebtedness: Mortgage debt used to acquire, build, or substantially improve a taxpayer’s primary residence.

Loss Aversion: One’s tendency to prefer avoiding losses.

Risk Aversion: One’s tendency to prefer avoiding risk.

Endowment Effect: Tendency to value things we own more highly than things we don’t.

Status Quo Bias: Bias against change, or change perceived as a “loss”

Standard Deduction: The deduction all taxpayers can qualify for regardless of whether they itemize their taxes.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 2.0 CFP / IWI (formerly IMCA) hours
• 3.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

10/30/2018

A common fear for nearly every investor, and probably becoming more popular everyday as life expectancy continues to grow, is will I outlive my money? This webinar will help to provide a possible solution to that question, the longevity annuity, while also discussing its benefits and drawbacks. The longevity annuity is a newer retirement planning tool and can offer a number of benefits. However, like all retirement products, perhaps especially annuities, there are caveats, concerns, and additional planning strategies to consider before actually purchasing a longevity annuity.

LO #1: Define who longevity annuities might work best for and identify the material risk associated with longevity annuities.

LO #2: Know why Social Security is essentially a form of a longevity annuity and identify why it is superior to other longevity annuities.

LO #3: Be able to compare and contrast the Internal Rate of Returns (IRRs) on equities to those of longevity annuities and explain to a client the difference/purpose of an investment versus an insurance/risk management product.

LO #4: Understand the importance of the credit quality of the insurer when reviewing longevity annuities as well as the risk to both the insured and the insurer.

LO #5: Be able to identify the other risks of longevity annuities, particularly for the insurance companies.

LO #6: Know why a retirement account may be the most favorable location to purchase and hold a longevity annuity.

Annuitant: This is the individual that receives the fixed some of money, usually for the rest of their life.

Annuity: A financial product that pays a fixed sum of money to someone, each year, usually for the rest of their life.

Longevity annuity: Sometimes referred to as a deferred income or advanced-life delayed annuity, this financial product converts a lump sum into a stream of income.

Immediate annuity: This type of annuity also converts a lump sum into a stream of income, however, it starts immediately instead of later in life.

Mortality credit: The share of the contributions from other people who did not survive.

Qualified Longevity Annuity Contract: These are purchased with pre-tax dollars, like an IRA or an employer retirement plan.

Non-Qualified Longevity Annuity Contract: These are purchased with after-tax dollars.

Risk Management: This is a term used to describe nearly any strategy that effectively handles some aspect of risk. In the case of annuities, this is often related to inflation and outliving one’s portfolio.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

The Tax Cuts and Jobs Act of 2017 created a new qualified business income (QBI) deduction. The reality is that this deduction may impact any owner of a pass-through entity business, and while there is still some additional clarification needed from the IRS on how some rules will be applied, there is a tremendous amount of opportunity for financial advisors who wish to assist their clients in navigating the new complex rules associated with the QBI deduction. In this presentation, we review the technical mechanics of the QBI deduction, including who the deduction impacts, what the thresholds are for applying the deduction, some important caveats for qualifying for the deduction, as well as some strategies that can be applied the maximize the benefit a taxpayer receives from the QBI deduction.

LO #1: Identify the percentage of qualified business income potentially eligible for a QBI deduction.

LO #2: Identify which business entities are eligible for a QBI deduction.

LO #3: Identify the thresholds for the phaseout of the QBI deduction.

LO #4: Identify businesses classified as specified service businesses.

LO #5: Identify the main categories of QBI deduction planning strategies.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• N/A NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 27, 2018

The Tax Cuts and Jobs Act of 2017 (TCJA) represents a major shift in tax law beginning in 2018. Although originally proposed as a way to simplify the complex tax system in the U.S., the changes under the TCJA arguably present even more tax planning complexity. The tax reform has implications for key tax components such as a wide range of popular deductions and credits, as well as the personal income tax, capital gains tax, the and Alternative Minimum Tax systems. These changes present new financial planning strategies for advisors and their clients.

LO #1: Identify how the tax code has evolved over time.

LO #2: Identify the new personal income tax brackets under the TCJA.

LO #3: Identify changes in the AMT tax system under the TCJA.

LO #4: Identify deductions available to pass-through entities under the TCJA.

LO #5: Identify the deductibility of advisory fees under the TCJA.

Tax Cuts and Job Acts: Signed into law on December 22, 2017 by President Trump. This act permanently changed Corporate Taxes and created a number of individual tax reforms that will sunset in 2025.

Marriage Penalty: This is when, if filing individually, two people would have a lower total tax bill than if they filed married, simply combining the income they made as individuals, and end up with a higher tax bill.

3.8 Medicare Surtax: This is a tax on unearned income, i.e. net investment income, that applies to high-income earners. This tax covers a broad swath of investment income from dividends and interest to most forms of passive income to capital gains.

Capital Gains: This the profit from the sale of property or an investment.

Alternative Minimum Tax (AMT): This is a supplemental income tax that sits on top of baseline income tax for certain individuals, corporations, estates, and trusts

Kiddie Tax: This is the rule that applies the parent’s tax rates to the taxes on a child’s investment and unearned income.

Pass-Thru Business: Covered in Section 199A, these types of business structures receive special treatment that allows the business to deduct a certain percentage of Qualified Business Income

Qualified Charitable Distribution: This is an otherwise taxable distribution from an IRA, where the owner is over age 70.5 and has decided to pay that distribution directly to a qualified charity.

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 1, 2018

Nearly every prospective retiree faces the decision about when to begin receiving Social Security payments, which can begin as early as age 62, or be delayed as late as age 70. The good news of delaying benefits is that they receive a guaranteed increase for each month and year of waiting; the bad news is that during the waiting period, no payments are received! This trade-off creates a “breakeven” period that must be reached in order for delaying to be beneficial. And for married couples, the situation is further complicated by the fact that the timing of when one spouse takes benefits can impact both the timing of spousal benefits and the size of survivor benefits. In this session, we look in depth at the trade-offs of Social Security timing, especially for married couples, the interplay between retirement, spousal, and survivor benefits, and strategies to optimize and maximizing Social Security retirement benefits for couples (includes divorced ex-spouses).

LO #1: Identify how how starting Social Security benefits early or late affects the benefit that the individual receives.

LO #2: Identify how to do an accurate breakeven analysis of Social Security benefits.

LO #3: Identify the similarities and differences between Spousal Benefits and Survivor Benefits.

LO #4: Identify how the Bipartisan Budget Act of 2015 has affected the File and Suspend.

LO #5: Identify when the new rules of the Bipartisan Budget Act of 2015 kick in.

Averaged Indexed Monthly Earnings (AIME): Calculated using top 35 years of earning history. Average of inflation indexed monthly earnings of your highest earning 35 years for your life.

Bendpoints: Income thresholds for determining replacement rate use a tiered system called a bendpoint. Bendpoint 1 is at 90% on first $896, Bendpoint 2 is at 32% for the next $4,507, and Bendpoint 3 is at 15% for $5,326 up to $10,725 a month. Replacements “bend” down from 90% to 32% and then 15% as income grows.

Primary Insurance Amount (PIA): Full benefit that you get at full retirement age, as income rises, your benefits also rise.

Spousal Benefit: based on 50% of a living spouses’ PIA, and available to ex-spouses as well. Individuals must meet both entitlement requirements and eligibility requirements.

Survivor Benefit: based on a deceased spouses PIA, and available to ex-spouses. Individuals must meet both entitlement and requirements and eligibility requirements

File & Suspend: This was the rule, killed by the Bipartisan Budget Act of 2015, that allowed a person who has reached their full retirement age, normally 66, the ability to claim or file for their social security benefit, but at the same time immediately put in the request to suspend the payments. In doing so, this allowed spouses the ability to claim the spousal benefit immediately and having suspended the benefit payment, accrue extra benefits through delaying actual payment

Restricted Application: This is a rule, being phased out by the Bipartisan Budget Act of 2015, that allows individuals of Full Retirement Age, 66 or 67, to apply for their spousal benefit while delaying their personal benefit to grow by 8% a year.

Bipartisan Budget Act of 2015: This is the act that ended file-and-suspend strategy as well as began the phasing out of restricted application.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 7, 2018

This session will give you key information on understanding AMT and its complications, how to evaluate client exposure, and the implications and planning strategies that stem from AMT’s expanding reach over your clients. Think you don’t have clients who will be concerned about AMT? Think again. Your clients have become increasingly exposed to AMT in recent years, and the trend will continue now that the fiscal cliff legislation has made current AMT rules permanent! If you don’t know how to spot potential AMT triggers and manage them, you had better learn – now!

LO #1: Identify common individual AMT adjustments.

LO #2: Identify how the AMT minimum tax credit (MTC) impacts future income.

LO #3: Identify AMT tax preference items.

LO #4: Calculate AMT liability.

LO #5: Identify common AMT adjustments and tax preference items that cause AMT exposure.

Marginal Tax Rate: Is the tax rate that will apply – at the margin – to the next $XX of income that the client earns, and/or the tax rate will be saved with the next $YYY of deductions.

Tax Bracket: This refers to the tax rate tiers that apply under the tax code at increasing levels of income.

Progressive Tax System: This is the style of tax system where those with higher income pay a higher percentage share of taxes.

Gross Income: Defined in IRC Section 61, Gross income is all income from whatever source derived [except as otherwise provided by the tax code]

Adjusted Gross Income: This is the income left over after eligible income types and sources have been excluded, and the negative economic adjustments have been made to account for income that wasn’t really received/earned/made.

Above the Line Deduction: These deductions are taken deducted or excluded when determining AGI

Below the Line Deduction: These are the deductions taken from AGI, after it has been determined in order to calculate one’s final taxable income

Alternative Minimum Tax (AMT): This is a supplemental income tax imposed by the federal government which is required in addition to income tax for some individuals, trusts, estates, or corporations

Capital Gains: These are the profits from the sale of property or an investment

Minimum Tax Credit (MTC): The MTC is a tax credit against future, regular income tax, to the extent that it does not create AMT

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 1, 2018

In this section, we are going to delve into not only the question of when to choose a Roth IRA versus a traditional IRA, but also when you want to conduct a conversion.

LO #1: Compare and contrast the basics of a Traditional versus Roth IRA.

LO #2: Explain the tax equivalency principal and calculate the amount of after-tax contributions needed to equal the same amount of pre-tax contributions given various tax rates and pre-tax contribution amounts.

LO #3: Identify the “Backdoor” Roth IRA strategy and the considerations for using it.

LO #4: Identify the Mega “Backdoor” Roth IRA Strategy and the rules for successfully implementing the strategy.

LO #5: Explain partial Roth conversion strategies and the additional tax planning flexibility they provide.

Bar Bell Strategy: Similar to a bond barbell strategy, one conversion will be done early and one conversion later in the year.

Tax Cuts & Job Act (TCJA): Passed on December 22^nd of 2017 this major tax reform closed the “loophole” on Roth recharacterizations. The TCJA eliminated the recharacterization of Roth IRA conversions made in 2018 or later.

Roth Conversion: This type of transaction can take place when the client has money in a traditional IRA and s/he decides to move it into a Roth IRA. The decision to make this move is based on when the client will be able to pay the least amount of taxes. When they put the money in or when they plan to take the money out.

Roth IRA: Like a traditional IRA, this is still an individual retirement account. However, instead of being taxed when the money comes out, Roth IRAs pay tax when the money goes in. Then, later, when the money comes out is not taxed, assuming withdrawals begin after 59 ½ and all growth in the account avoids taxation.

Roth recharacterization: Originally created to “undo” a Roth conversion for someone who later discovered they were over the conversion income limit.

IRA Aggregation Rule: IRC 408(d)(2): Requires that all IRAs aggregate for tax purposes: contributory, SEP, simple, and any other individual IRAs. However, this does not apply to spouse’s IRAs, inherited IRAs, Roth IRAs, or any retirement plans.

Actual Contribution Percentage (ACP) Testing: A test required by the IRS to ensure that 401(k) plans are nondiscriminatory.

Pro Rata Rule: This is the formula that determines how much of a distribution is taxed when an individual owns both after-tax and pre-tax IRAs. This is related to the IRA Aggregation rule.

5-Year Rule: A person must have a Roth account for at least 5 years in order for it to be tax-free.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 31, 2018

The conventional view of rebalancing is that it’s a way to enhance long-term returns for investors while keeping their portfolio on target to achieve long-term goals. The reality, though, is that when rebalancing across different asset classes like stocks and bonds, systematic rebalancing is more likely to reduce returns, albeit with the benefit of also reducing risk. And for those who wish to engage in the strategy, it’s still necessary to consider the optimal frequency for rebalancing – which, as it turns out, is not based on a fixed time horizon like monthly, quarterly, or annual rebalancing, but instead is best done by targeting asset allocation thresholds at which a rebalancing trade will trigger (however long it takes to get there!).

LO #1: Understand why rebalancing does not necessarily improve returns in the long run, but may improve risk-adjusted returns instead

LO #2: Be able to determine which types of asset class rebalancing are potentially able to enhance returns, versus merely reducing risk

LO #3: Understand why fixed time period rebalancing strategies are not necessarily optimal for most portfolios, especially when considering transaction costs

LO #4: Be able to apply a tolerance band approach to portfolio rebalancing, and know how to set targets for rebalancing thresholds

Risk-Adjusted return: This is the amount of return refined by how much risk the investor or portfolio had to take in order to achieve that return.

Diversification: A portfolio with multiple asset classes, some of which would be similar but many of which would be different in terms of risk and movement increase the diversification of a portfolio.

Asset class: This is a group of securities, for example bonds, that behave similarly in the marketplace. Other classes would be equities or cash equivalents.

Asset allocation: Associated with investment strategy, an asset allocation is trying to balance the amount of risk in a portfolio with the goal and time associated with that portfolio.

Rebalancing: The act of setting the portfolio back to its original asset allocation, after market returns distort the original allocation, by selling high and buying low.

Tolerance band rebalancing: Rebalancing strategy based on extremes, not timing or frequency.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 31, 2018

For long-term investors, the reality is that even if markets are volatile for a period of time, as long as the portfolio stays invested, returns can average out in the long run. In the case of retirees, however, ongoing spending withdrawals introduce the possibility that if the portfolio experiences weak returns early on, it could be depleted entirely before the good returns finally show up. As a result, retirees must consider this “sequence of returns” risk when planning for retirement, and strategies to manage it, from reducing spending in the first place, to engaging in more dynamic asset allocation to reduce risk exposure, or dynamic spending strategies to adapt spending withdrawals to market changes along the way!

LO #1: Understand what sequence of return risk is, and how it affects a retirement portfolio

LO #2: Know the origin of the “safe withdrawal rate” and how to apply it in today’s low-return environment

LO #3: Be able to compare different types of dynamic asset allocation strategies and ways to create spending “floors” for retirees

LO #4: Be able to apply dynamic spending strategies with clients, and understand how to set the parameters for retirees to manage along the way

Return Sequencing: A risk to retirement spending based on trusting an average return.

Safe Withdrawal Rate: Developed in 1994 by Bill Bengen, this is ultra-conservative 4% withdrawal rate based on the lowest returns.

Bucket Strategies: This is a retirement withdrawal strategy that avoids spending down equities until after cash or a conservative portfolio (bonds) has been depleted, giving time for the equities to grow or recover from any potential loss.

Equity Guidepath: Different, but related to the bucket strategy, this is when clients spend down fixed income assets in early years in order to purposefully let their equity exposure rise throughout their retirement.

Ratcheted Spending: The process of potentially bringing spending up (ratcheting up 10%), after reviewing the portfolio every three years, from the 4% rule floor. This starts out ultra-conservatively.

Inflation: This is a sustained increase in the general level of prices for goods. Prices rise over time; what is worth $10 dollars today will be worth more in the future.

Dynamic Spending Strategy: This is a methodology of solving a larger problem by breaking it down into smaller problems. In terms of retirement and retirement projects, it is taking the long term retirement plan and breaking it into a series of sequential retirement years, each of which can then be optimized based on what happened (or didn’t happen) in the preceding years.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

November 9, 2018

For most of their history, reverse mortgages have been rather unpopular with financial planners, due both to their relatively high costs, and the fact that they are typically viewed as a resource or tool of last resort. Yet the reality is that use of reverse mortgages has exploded over the past decade, aided more recently by a newer, lower cost option, and several recent research articles in the Journal of Financial Planning have shown ways that reverse mortgages can be used proactively to enhance retirement income sustainability. In this presentation, we review the technical mechanics of HECM reverse mortgage loans, the costs involved, the emerging reverse mortgage strategies and applications that should be considered for clients, and the caveats and concerns that remain.

LO #1: Discuss the requirements for someone to be able to use a reverse mortgage.

LO #2: Understand how a reverse mortgage works and list the various “triggering events”.

LO #3: Explain the costs associated with a reverse mortgage.

LO #4: Describe the tax treatment of reverse mortgages.

LO #5: Discuss when a reverse mortgage may a good idea and when it may not be ideal.

LO #6: Identify the caveats and concerns of reverse mortgages.

Reverse Mortgage: Originating in the 1960s, but gaining in popularity before the crash in 2008, this is an agreement between the homeowner and the bank to relinquish the homeowner’s equity in the home in exchange for payments.

Maximum Claim Amount (MCA): The is the maximum dollar amount that the FHA will insure for a reverse mortgage.

Prime Mortgage Insurance (PMI): This is insurance the protects the holder against loss resulting from default on a mortgage loan.

Federal Housing Administration (FHA): This the government agency, created by the National Housing Act of 1934, and they set the standards for construction and underwriting and insures loans made by banks and other private lenders.

HO-2: This is the perils insurance for one’s property

HO-3: This is the insurance that protects dwellings and structures connected with the dwelling, as well as personal property that may not be in the main dwelling

Home Equity Conversion Mortgages (HECM): This is the FHA’s reverse mortgage program.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.

October 30, 2018

While it is ‘standard’ for advisors to diversify into an asset allocated portfolio, the question of where to locate those asset classes is more challenging. In this session, we will explore the various ways to handle asset location, taking into consideration tax efficiency, expected returns, and time horizons. We also take a look at how to build, use, and implement an asset location priority list based on the expected return and the tax efficiency of various assets. Finally, we review the caveats and concerns of asset location and approximate the value of utilizing an asset location strategy with your clients.

LO #1: Identify the ways to “asset locate” and the impact of each.

LO #2: Describe the impact that turnover has on the final portfolio value and how it changes the optimal location of stocks in a portfolio.

LO #3: Be able to explain where various types of assets fall within the asset location priority list.

LO #4: Identify the factors in building an asset location priority list

LO #5: Illustrate how a financial planner can implement an asset location strategy.

Asset Location: This is the personal finance term that indicates how or that investors can distribute money across different investments, but more importantly investments with different taxation.

Taxable Account: A good example is a brokerage account, and the tax treatment for this type of account is based on what is in the account – stocks or bonds.

Tax-Deferred Account: A good example is an IRA or a 401(k), taxes are not paid when the money goes in, but are taxable as ordinary income when withdrawn, and that ordinary income treatment applies

Tax-Exempt Account: A good example is a Roth IRA or a 529 college savings plan, and these accounts grow initially tax-deferred and allow withdrawals of the growth to be tax free assuming the requirements are met.

Long-term capital gains: These can also be long-term capital losses, and different from short-term gains and losses based on taxation. For instance, long-term capital gains stem from selling an investment that has been held for longer than 12 months at the time of the sale.

Buy-and-hold: This is a passive investment strategy where once the investor purchases his or her stock, s/he then holds it for an extended period of time regardless of fluctuation in the marketplace.

Dividends: Most often paid on a quarterly basis, this is a distribution of a portion of a company’s earnings, paid to the shareholders. Dividends can be cash, stock, or other property.

Tax-efficiency: This is another way to describe an investment strategy that minimizes tax liability.

Equities: This is referring to stocks or shares of a company.

Bonds: This is a fixed-income investment. The investor loans the money and in return receives a variable or fixed interest rate in return to pay back the loan over a certain period of time.

Time Horizon: The is the length of time over which an investment can grow (or not) and is held before liquidating or selling at some point in the future.

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic

• CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
• NASBA: Specialized Knowledge (Personal Financial Planning)

• 1.0 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours

This course will be available at least through December 31, 2019.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.