Kitces Report
Kitces Topic Areas:
- General Planning
Program Description:
Historically, there has been limited research and insight when it comes to assessing how financial advisors actually work. To establish advisor trends in productivity with respect to preparing plans, using technology, and determining client fees, Kitces Research conducted its third bi-annual survey of financial advisors in 2022. In this latest report, various perspectives of financial advisor productivity are examined, and findings are compared with those from previous studies conducted in 2018 and 2020.
Learning Objectives:
1. Discuss how financial advisors spend their time differently based on their advisory roles and business models.
2. Identify the components of and differences between the Calculator, Comprehensive, Customized, and Collaborative planning approaches and how each approach impacts plan delivery.
3. Describe how different members of a financial advisory team impact financial plan creation.
4. Explain how CFP certification impacts an advisor’s plan development process and the time spent on developing the plan.
5. Evaluate the different ways that financial planners communicate with clients.
6. Compare how different financial planning tools are used and how they impact the financial planning process.
7. Determine how financial planning fees and fee structures relate to different business models and clientele.
Key Terms:
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.
Collaborative Planning: Financial planning approach that generally relies on planning software used as a live/real-time collaborative tool with clients during client meetings.
Custom Planning: Financial planning approach that generally relies on custom-written plan developed for each individual client’s circumstances.
Comprehensive Planning: Financial planning approach that generally relies on printed reports from financial planning software used to show a more holistic picture of the client’s current and project ted financial situation.
Calculator Planning: Financial planning approach that generally relies on plan analyses to calculate the client’s needs or gaps, which help the advisor identify products to implement.
Broker-Dealer (B/D): A financial entity engaged in executing securities trades in their own account as a dealer, and in executing securities trades on behalf of customers as a broker.
Financial Planning Practice: An entity for which there is a common business vision, budget, client base, and service standard. Across the entity, resources and profits are pooled. A practice could be an entire firm, an individual, or a team of individuals affiliated with a larger firm (e.g., a broker-dealer, an independent RIA, or a platform service provider).
Service Team: A subset of a practice that consists of a group of individuals within the practice that serves a defined client base, with at least 1 individual managing client relationships and leading the delivery of financial planning advice. Support roles could include associate advisor, paraplanner, or client service administrator.
Unsupported Solo Advisor: Advisors with no other advisors or W-2 employees.
Supported Solo Advisor: Senior advisor with ultimate responsibility for all clients of the practice, supported by 1 or more W-2 employees, which may include associate advisors.
Senior Advisor: Accountable for managing the most valued client relationships as well as business development and mentoring other advisors.
Ensemble Advisory Firm Or Team: Multiple advisors or advisor teams pooling all resources and profits, where clients are clients of the firm and are served under a consistent standard.
Silo: Multiple advisors or advisor teams, each independently responsible for their own distinct client base and profits.
Service Advisor: Primarily accountable for relationship management and retention of existing clients.
Associate Advisor: Supports more senior advisors on a team to deliver advice in a client-facing capacity but typically has no primary responsibility for client relationships.
Paraplanner: Conducts financial planning analyses and provides similar financial planning support for more senior advisors but is not responsible for delivering recommendations to clients.
Financial Planning Specialist: Serves as a centralized planning resource to support all advisors of a practice; may include Director of Financial Planning.
Client Service Associate: Interacts with clients only with respect to administrative requests.
Level of Complexity:
CFP / IWI: Intermediate
NASBA: Basic
Recommended CPE:
- 3.0 CFP hours
- 4.0 NASBA hours
- 3.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 3.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
8.25.2020
Kitces Topic Areas:
- General Planning
Session Description:
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 is second, bi-annual survey of financial advisors. In this research-based newsletter, we begin to answer these questions about how financial planners work and compare findings from 2018 to more recent 2020 findings.
Learning Objectives:
– LO #1: Identify the different ways in which financial advisors use their time by examining advisor role as well as business model, comparing 2018 and 2020 data.
– LO #2: Identify the difference between financial advisors’ approach: calculator, comprehensive, customized, and collaborative and how that approach impacts 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, and how they don’t.
– LO #7: Identify the ways in which financial planning fees and fee structure are related to the business model and clientele.
Key Terms:
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 (AUM): 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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 2.0 CFP hours
- 3.0 NASBA hours
- 2.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
April 30, 2019
Kitces Topic Areas:
- Insurance
- Taxes
Session Description:
There are few things more expensive than unexpected – and uninsured – medical expenses. Whether the medical expense is a sudden health event, the progression of a chronic illness, or due to a permanent disability, serious health-related expenses can wreak havoc on a family’s finances. Sadly, medical-related bankruptcy filings now account for nearly two-thirds of all bankruptcy filings. And to that end, each year, more than a half million are forced into bankruptcy as a result of medical-related events, from the high cost of care to the impact of lost wages.
As a result, to the extent that medical expenses do occur, and need to be paid, it is crucial to maximize the available tax benefits that the government provides to help support households in their time of medical need… from the income tax deduction for (qualified) medical expenses, to the treatment of paying to get into medical facilities, premiums for various types of insurance to protect against such expenses, and the receipt of those insurance benefits themselves.
Learning Objectives:
LO #1: Identify how to use the income deduction for qualified (uninsured) medical expenses.
LO #2: Identify the impact of the TCJA on deductible medical expenses.
LO #3: Identify how to handle costs incurred for dependents.
LO #4: Identify the importance of the timing of qualified medical expenses.
LO #5: Identify qualified and non-qualified medical expense.
LO #6: Identify the impact of residence-related qualified medical deductions.
LO #7: Identify the tax deductibility of upfront and ongoing continuing care retirement communities (CCRCs).
LO #8: Identify different strategies for using different accounts (tax-favored, ABLE, retirement) for qualified medical expenses.
Key Terms:
Adjusted Gross Income (AGI): This refers to a person’s total gross income minus specific deductions.
Hurdle Rate: The specified percentage of adjusted gross income (AGI) hat the taxpayer’s medical expenses must exceed in order to be deductible.
Continuing Care Retirement Communities (CCRCs): Retirement communities that are hallmarked by providing varying levels of medical and/or long-term care within the same community and location.
Flexible Spending Accounts: This is a tax-advantaged account, but most of the money in it has to be used by the end of the year. Only $500 can be carried over.
Archer Medical Savings Accounts: This is an account designed for employees of small businesses and self-employed individuals with high-deductible health plans.
Health Savings Accounts: The “gold” standard because they allow for tax-deductible contributions and tax-deferred growth earnings, in addition to the fact that distributions made to pay for medical expenses are 100% tax free.
Achieving a Better Life Experience Act (ABLE) Accounts: These are tax-preferenced accounts that can be used to help save and invest for individuals who have already become disabled (or blind) by their 26th birthday.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Recommended CE Hours:
- 1.5 CFP hours
- 2.0 NASBA hours
- 2.0 IRS EA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
January 30, 2019
Kitces Topic Areas:
- Estate Planning
- Taxes
Session Description:
In the past, estate planning was a primary objective for the mass-affluent needing to avoid Federal estate taxes. Recent estate tax changes though, estate planning will really only matter to a very small minority. For everyone else, the new focus will be on tax-planning at death, specifically maximizing available step-up in basis opportunities.
Learning Objectives:
LO #1: Identify the different ways in which assets are treated, receiving a step-up in basis or not, after an individual has passed.
LO #2: Identify the how IRD deductions are used and applied.
LO #3: Identify how steps-down in basis are treated.
LO #4: Identify planning considerations for when property is held jointly between spouses at death.
LO #5: Identify planning strategies to maximize step-up in basis opportunities.
LO #6: Identify strategies for transferring assets between spouses before death.
LO #7: Identify planning strategies for capital losses.
LO #8: Identify trust strategies to maximize step-up in basis.
Key Terms:
Income in Respect of Decedent: Any type of pre-tax asset whose ordinary income tax consequences were not already recognized before the decedent passed away.
IRD Deduction: Federal income tax deduction that can be claimed by the recipient of the IRD asset for any Federal estate tax paid attributable to the IRD asset.
Step-Up In Basis Rule: This rule essentially treats the beneficiary of an asset received due to the owner’s death as though they purchased the inherited asset for its fair market value on the date of the decedent’s death.
Portability: This term applies to the Federal estate tax exemption, made permanent by the American Taxpayer Relief Act of 2012, that allows the surviving spouse to transfer any of the deceased spouse’s unused exemption amount to the surviving spouse.
IRC Section 2038 Marital Trust: This is an advanced technique to try and secure a step-up in basis for all marital assets upon the passing of the first spouse.
Joint Exempt Step-Up Trust: This trust forms a single joint trust with separate shares for both the husband and wife, where each spouse retains the right to revoke his/her share of the trust until their death.
Capital Loss: A capital loss occurs whenever there is a loss on a capital asset, such as real estate or stock; i.e. it decreases in value.
Qualified Terminable Interest Property (QTIP) Trust: A type of marital trust designed to provide for the spouse after death that at the same time protects assets for future generations.
Medicaid: This is the healthcare coverage that covers low-income adults, children, pregnant women, and the elderly.
Boomerang Period: The one-year waiting period that applies to gifting assets.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Recommended CE Hours:
- 1.5 CFP hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
- 2.0 IRS EA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
November 12, 2018
Kitces Topic Areas:
- Personal/Career Development
- Practice Management
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
- 1.5 IWI General Financial Planning hours
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP hours
- 2.0 NASBA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
December 4, 2018
Kitces Topic Areas:
- Client Trust & Communication
- Financial Psychology
- General Planning
Session Description:
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!
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
- 1.0 IWI General Financial Planning hours
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
November 14, 2018
Kitces Topic Areas:
- Insurance
- Retirement Planning
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 23, 2018
Kitces Topic Areas:
- General Planning
- Retirement Planning
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 25, 2018
Kitces Topic Areas:
- General Planning
- Investments
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate/Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 20, 2018
Kitces Topic Areas:
- Investments
- Taxes
Session Description:
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!
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
November 9, 2018
Kitces Topic Areas:
- Annuities
- Retirement Planning
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- CFP / IWI (formerly IMCA) hours
- NASBA hours
- IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
June 30, 2014
Kitces Topic Areas:
- Annuities
- Estate Planning
- Taxes
Program Description:
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).
Learning Objectives:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 0.0 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 25, 2018
Kitces Topic Areas:
- Investments
- Retirement Planning
- Taxes
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 20, 2018
Kitces Topic Areas:
- Investments
- Retirement Planning
- Taxes
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.0 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
December 3, 2018
Kitces Topic Areas:
- General Planning
- Investments
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.0 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 25, 2018
Kitces Topic Areas:
- Estate Planning
- Taxes
Session Description:
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.
Learning Objectives:
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.
Key Terms:
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA): Signed into law on December 17th, 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 2nd, 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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
November 9, 2018
Kitces Topic Areas:
- Investments
- Retirement Planning
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 20, 2018
Kitces Topic Areas:
- General Planning
- Human Capital
- Investments
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 30, 2018
Kitces Topic Areas:
- General Planning
- Taxes
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 25, 2018
Kitces Topic Areas:
- General Planning
- Investments
Session Description:
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.
Learning Objectives:
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.
Key Terms:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Nerd's Eye View
Kitces Topic Areas:
- Nerd's Eye View
Program Description:
This month we review the August blog articles. This quiz includes the following articles: Motivational Interviewing Techniques To Help Clients Talk Themselves Into Implementing Advice and Crafting More Equitable Advisor Non-Solicit Agreements With The ACRES Agreement
Learning Objectives:
1. Evaluate how the 4 guiding principles of motivational interviewing support the general steps involved in the process.
2. Describe the stages of change and where ambivalence most commonly occurs during those stages.
3. Discuss the role of desire and fear in motivation.
4. Understand the role of the Broker Protocol in the historical use of employment agreements by financial services companies.
5. Differentiate the differences between non-compete and non-solicit agreements and how each have played a role in the financial advice industry.
Specialized Knowledge:
- CFP and IWI: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA Topic Area(s): New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
Program Description:
This month we review the August blog articles. This quiz includes the following articles: Planning For Adoption: Understanding Different Pathways And Their Costs, Tax Breaks, And Financial Assistance Available; IRS Notice 2023-54 Provides Welcome Relief To 10-Year Rule Beneficiaries And Retirement Account Owners Born In 1951; “Legacy IRA” Rollover To A Charitable Gift Annuity: Using This New Tax-Advantaged Opportunity To Help Clients Achieve Charitable And Retirement Goals
Learning Objectives:
1. Explain different tax planning opportunities available to adoptive parents.
2. Describe various pathways to adoption and associated cost estimates.
3. Discuss the impact of IRS Notices 2023-53 and 2023-54 on RMDs for inherited retirement accounts.
4. Understand the updated RMD requirements for individuals depending on age and birthdates.
5. Understand how SECURE 2.0 made Legacy IRAs available by expanding the provisions for charitable IRA rollovers.
Specialized Knowledge:
- CFP and IWI: Tax Planning
- NASBA: Taxes
- NASAA Topic Area(s): New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Program Description:
This quiz includes the following articles: Form U4: Common Missteps And Best Practices For RIAs; and RIA Code Of Ethics: Important Nuances To Note In Relatively Straightforward Requirements.
Learning Objectives:
1. Understand the purpose of Form U4 and what it discloses.
2. Describe common mistakes made when filing Form U4 and some best practices to avoid those mistakes.
3. Understand the challenges an RIA facse when preparing Form U4.
4. Describe the 5 components that constitute the minimum requirements related to Codes of Ethics that must be maintained by all SEC-registered investment advisers.
5. Develop a compliant code of ethics.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: Ethics
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Program Description:
This quiz includes the following articles: Paid Solicitation Under The SEC Marketing Rule: Using Third-Parties For Lead Generation And Prospecting; Form ADV Part 1: Common Missteps And Best Practices For RIAs.
Learning Objectives:
1. Understand the differences between solicitors, promoters, and providers, as defined by the SEC.
2. Distinguish between ADV Part 1 and ADV Part 2A.
3. Distinguish when testimonials and endorsements are considered advertisements.
4. Recognize common issues faced when completing Form ADV Part 1.
5. Identify the difference between the four ADV forms.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: Ethics
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Program Description:
This month we review the July blog articles. This quiz includes the following articles: Why International Diversification Is Still The Prudent Strategy (While Keeping Behavioral Biases, Risks, And Results In A Healthy Perspective); Changes To Student Loan Planning With The New SAVE Income-Driven Repayment (IDR) Plan; IAR CE: Continuing Education Requirements For Investment Adviser Representatives And How Different States Adopt NASAA’s Model Rule; and The Growth Of Collaborative Planning – And Decline Of “The (Written Financial) Plan”
Learning Objectives:
1. Understand how recency bias can impact an investor’s viewpoint on global diversification.
2. Discuss the general trend of market diversification across countries after a systemic financial crisis.
3. Evaluate the impact of the new SAVE Income-Driven Repayment (IDR) Plan on student loan borrowers.
4. Describe the new continuing education requirements for Investment Adviser Representatives.
5. Discuss how collaborative planning strategies can facilitate better client engagement.
Specialized Knowledge:
- CFP and IWI: Investment Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA Topic Area(s): New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 1.5 CFP hours
- 2.5 NASBA hours
- 1.5 IWI General Financial Planning hours
- 0.5 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.5 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Program Description:
This month we review the June blog articles. This quiz includes the following articles: Form U4: Common Missteps And Best Practices For RIAs; Why Pre-Commitment Strategies Can Work And 3 Steps To Implement Them With (The Right) Prospects; RIA Code Of Ethics: Important Nuances To Note In Relatively Straightforward Requirements; and Flip ‘Plan Presentation’ Into ‘Plan Engagement’ Meetings To Generate More Focus And Reflective Questions From Client
Learning Objectives:
- Understand the purpose of Form U4 and what it discloses.
- Describe common mistakes made when filing Form U4 and some best practices to avoid those mistakes.
- Discuss the behavioral biases that make pre-commitment strategies so effective.
- Describe the 5 components that constitute the minimum requirements related to Codes of Ethics that must be maintained by all SEC-registered investment advisers.
- Describe a ‘flipped classroom’ approach and how it can be applied to a financial planning meeting.
Specialized Knowledge:
- CFP: Professional Conduct and Regulation
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA Topic Area(s): New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 1.5 CFP hours
- 2.5 NASBA hours
- 1.5 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.5 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Program Description:
This month we review May blog articles. This quiz includes the following articles: Foster More Productive Client Meetings By Mitigating Interruptions Based On (Conversational) ‘Intensity Level’, Instead Of Asking “Why”, Try “What Else” To Get Clients To Open Up About Goals, and 5 Screening Questions To Assess Client Readiness And Appropriateness (And Why It’s Especially Useful For Some Firms)
Learning Objectives:
- Describe different individual conversational intensity levels.
- Discuss how individuals with different conversational intensity levels are impacted by interruptions.
- Explain the caveats of asking clients the question, “Why?” as a way to get explore their financial backgrounds.
- Understand when a screening call process can be most beneficial for a financial planning firm.
- Discuss how screening call questions can be used to identify relationships that will be a good fit for an advisor’s firm.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Program Description:
IAR CE applied for, but reporting may be delayed.
This month we review May blog articles. This quiz includes the following articles: Investing For Nonimmigrant Visa Holders: Understanding Visa Types, Investment Challenges, And Tax Implications and Pass-Through Entity Taxes: Mechanics, Considerations, And Planning Opportunities For Navigating SALT Cap Workarounds.
Learning Objectives:
- Describe the types of nonimmigrant worker visas and the prerequisites to obtain them.
- Discuss the investment challenges faced by foreign nonimmigrant workers in the U.S.
- Understand what the Federal SALT deduction cap and how it impacts individual taxpayers.
- Explain how the Pass-Through Entity Tax is being used by some states to alleviate the impact of the Federal SALT deduction cap on certain business owners.
- Describe some of the scenarios where electing the PTET can benefit an individual taxpayer.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Estate Planning
- Nerd's Eye View
Program Description:
This month we review the April blog articles. This quiz includes the following articles: Build (Customized) Flexible Estate Planning Strategies In A Constantly Changing Political Landscape;
How Different Monte Carlo Models Perform In The Real World: Assessing Quality Of Predictiveness In Retirement Income Forecasting Models; Switching Between State And SEC Registration: Evaluating Options (And Requirements) For RIAs Nearing $100 Million RAUM; and Crafting An Annual Compliance Calendar For A (Solo) RIA: Staying On Top Of Compliance Tasks While Serving Clients
Learning Objectives:
- Discuss some of the ways that Federal legislation has impacted estate and tax planning.
- Identify how disclaimer trusts and Clayton trusts can offer adaptability to changing tax laws.
- Explain why traditional Monte Carlo analyses might not be the best probabilistic forecasting model to use in retirement planning.
- Understand the different requirements for registering with the SEC and at the state level, and when advisers need to switch between state and SEC registration.
- Describe the basic compliance requirements for which a solo RIA is responsible.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 2.0 CFP hours
- 2.5 NASBA hours
- 2.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
A/B Trust: A joint revocable trust created by a married couple. When the first spouse dies, the trust splits into two parts: the survivor’s portion of the trust (called the “Marital Trust” or “A Trust”) and an irrevocable Credit Shelter Trust (called the “Family Trust” or “B Trust”).
Brier Score: A score function calculated to assess the accuracy of a predictive model, based on the mean squared error of the predictions of the model. A lower score indicates more accurate predictability.
Clayton Trust: A revocable trust that allows an option to create an irrevocable QTIP trust and/or bypass trust upon the death of the first spouse.
Decanting Provision: An irrevocable trust provision that allows trust assets to be ‘poured’ into a new irrevocable trust if the original is no longer suitable.
Disclaimer Trust: Revocable A/B Trust structure that directs all assets to the Marital Trust upon the death of the first spouse. The surviving spouse is given the discretionary option to disclaim any assets to the Credit Shelter Trust.
Form ADV: Foundational registration documents that must be submitted by any investment adviser seeking to become registered with the SEC or the states.
Intentionally Defective Grantor Trust (IDGT): A type of trust structure where the income of the trust is still the grantor’s for income tax purposes, but the assets of the trust are excluded from their estate for estate tax purposes.
Monte Carlo Analysis: A type of probability-based analysis often used in retirement planning, which at a basic level calculates multiple iterations of a client’s projected income and spending over a specified time period while randomizing investment returns, with an output representing the percentage of iterations in which the client did (or did not) deplete their assets over the time period.
Qualified Terminable Interest Property (QTIP) Trust (aka ABC Trust): An irrevocable trust for married couples that permits the grantor to provide trust income (and sometimes principal) to support a surviving spouse, while maintaining control of trust assets to distribute to the trust beneficiaries once the surviving spouse dies.
Regime-Based Monte Carlo Simulation: Adjusting the return and standard deviation assumptions in a Monte Carlo analysis to emulate particular market conditions for certain periods of time; for example, adjusting the first ten years of an expected timeline to reflect expectations based on current valuations.
Regulatory Assets Under Management (RAUM): Defined by the SEC as “securities portfolios for which [advisers] provide continuous and regular supervisory or management services.” For most states, an RAUM over $100 million requires registration at the SEC level.
Tax Cuts And Jobs Act (TCJA) of 2017: Signed into law in December of 2017 by President Donald Trump, this was the largest re-write of the Federal Tax Code in more than 30 years, and, among other measures, closed the loophole on Roth recharacterizations by eliminating the ability to recharacterize Roth IRA conversions made in 2018 or later.
Trust Protector: A third-party who is responsible for overseeing trust activities and resolving disputes, with the power to amend trust provisions if certain conditions result in the trust running in contrast to the grantor’s original intent.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Insurance
- Nerd's Eye View
Program Description:
This month we review the March blog articles. This quiz includes the following articles: Framing Prospect Conversations Around What Motivates Them Today (And Not Their Future Goals), Factor Investing And Its (Behavioral) Persistence: Facts and Fiction About The Zoo Of Factors, Instant-Issue Term Life Insurance: What Are The Costs Of Low-Hassle Coverage, And When Are They Worth It?, and Discovery Meeting Framework: 6 Questions To Help Prospects Who Are Resistant To Change
Learning Objectives:
- Explain how focusing on current pain points can motivate clients more than discussing future dreams when it comes to taking action on their financial plans.
- Define what factor-based investing is and how to assess whether a particular factor may be worthy of consideration.
- Understand some of the risk-based and behavioral theories offered for different factor styles.
- Discuss the pros and cons of instant-issue term life insurance.
- Describe how the Transtheoretical Model of Change can apply to financial planning clients.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 2.0 CFP hours
- 3.0 NASBA hours
- 2.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
Investment Factor: specific drivers that influence a security or portfolio’s return. Th two main types of factors include macroeconomic (e.g., economic growth, inflation, credit, etc.) or style (e.g., value, momentum, quality, size, carry).
Capital Asset Pricing Model (CAPM): A model that defined how risk can drive expected returns of a particular investment by examining risk and return through its exposure to market beta.
Beta: A measure of a security’s (or portfolio’s) volatility, or risk relative to the overall market.
Instant-Issue Term Insurance: Term life insurance policy that provides a (nearly) instantaneous decision to an applicant with no underwriting requirements.
Accelerated/Non-Med Insurance: Term life insurance policy that provides a faster decision (often around 2-4 weeks) and simpler underwriting requirements than traditional term life insurance policies.
Underwriting: A process that helps insurance companies determine the risk involved with insurance applicants through gathering information to develop a profile based on the applicant’s age, gender, health, medical history, and lifestyle factors that can impact a person’s health.
Transtheoretical Model (TTM) Of Change: A theoretical model developed by James Prochaska, John Norcross, and Carlo DiClemente, which describes the process of change in six stages.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Program Description:
This month we review the February blog articles. This quiz includes the following articles:
Paid Solicitation Under The SEC Marketing Rule: Using Third-Parties For Lead Generation And Prospecting; Navigating the Thrift Savings Plan: Planning Opportunities To Support Federal Employees, Military Servicemembers, And Veterans; The HSA ‘Deathbed Drawdown’: Making Tax-Efficient Distributions Of Large Balances (When There Isn’t Much Time) ; and Form ADV Part 1: Common Missteps And Best Practices For RIAs
Learning Objectives:
1. Understand the differences between solicitors, promoters, and providers, as defined by the SEC.
2. Distinguish when testimonials and endorsements are considered advertisements.
3. Describe the main features of the Thrift Savings Plan.
4. Assess the benefits and potential drawbacks of superfunding Health Savings Accounts.
5. Recognize common issues faced when completing Form ADV Part 1.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 2.0 CFP hours
- 2.5 NASBA hours
- 2.0 IWI General Financial Planning hours
- 1.5 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
Promoter: A term introduced by the SEC’s new Marketing Rule that replaces “solicitors”. They can include an adviser’s client (for purposes of a testimonial) or a person other than a client (for purposes of an endorsement) who reaches out to other prospective clients and tells them about the adviser’s firm and/or services.
Solicitor: Term formerly used to describe any person who, directly or indirectly, solicits any client for, or refers any client to, an investment adviser,
Testimonial: Any statement by a current client or private fund investor “(i) about the client or investor’s experience with the investment adviser or its supervised persons; (ii) that directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser; or (iii) that refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.”
Endorsement: A statement by a person other than a current client or private fund investor that “(i) indicates approval, support, or recommendation of the investment adviser or its supervised persons or describes that person’s experience with the investment adviser or its supervised persons; (ii) directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser; or (iii) refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.”
Operators: Lead-generation firms, adviser referral networks, and client-to-adviser matchmaking websites.
Ineligible Person: According to the SEC’s Marketing Rule, someone who is subject to a disqualifying SEC action or who is subject to a disqualifying event.
Thrift Savings Plan (TSP): The Federal employee and military member’s version of the 401(k) plan.
Blended Retirement System (BRS): The military retirement system that was developed out of an effort to create flexibility and mirror what retirement benefits are available to civilians.
Health Savings Account (HSA): A savings account that receives favorable tax treatment when distributions are used to pay for medical expenses. Contributions are tax-deductible, growth is tax-deferred, and withdrawals used to pay for (qualified) healthcare expenses are tax-free. In order to contribute, an individual must be covered by an HSA-eligible HDHP and have no other health coverage, may not be enrolled in Medicare, and may not be claimed as a dependent on someone else’s tax return.
High-Deductible Health Plan (HDHP): A healthcare plan that has a higher deductible requirement than a traditional health insurance plan. In order to be an HSA-eligible HDHP, a plan must have a minimum annual deductible and a maximum annual out-out-pocket amount that meets the limits set by the IRS.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This month we review the January blog articles. This quiz includes the following articles: Implementing Retirement Income Guardrails To Facilitate (The Right) Spending Raises And Spending Cuts, Providing Mortgage Advice In A Higher Interest-Rate Environment: Opportunities For Advisors To Add Value, Is Private Debt Worth Considering As An (Alternative) Asset Class In Client Portfolios?, and Creating A (Just In Case) Game Plan For Clients Facing Layoffs.
Learning Objectives:
1. Describe how advisors can best implement a ‘guardrail’ retirement income strategy and discuss the strategy with clients.
2. Learn ways advisors can add value for their clients in a higher interest-rate environment.
3. Understand the considerations underlying whether an investment in a private debt fund might be appropriate for a given client.
4. Describe how advisors can help clients prepare for a potential job layoff.
5. Understand how an advisor can support a client who is laid off from their job.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 2.0 CFP hours
- 3.0 NASBA hours
- 2.0 IWI General Financial Planning hours
- 0 IWI Taxes and Regulations hours
- 0 IWI Ethics hours
- 0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
Guardrails Strategy: A retirement spending approach developed by Guyton and Klinger, this strategy considers upper and lower portfolio limits (i.e., the “guardrails”), that serve as pre-determined thresholds for determining when to increase or decrease future spending.
Intra-Family Loan: A type of loan where the loan recipient receives the loan from a family member rather than a commercial institution. Such a loan can provide the lender with interest income and the recipient with a lower interest rate than they might otherwise receive, but the loan must be set up in accordance with IRS regulations to avoid running afoul of gift tax rules.
Equity Risk Premium: The excess stock returns over a ‘risk-free’ asset (e.g., government bonds) demanded by investors to compensate for the additional risk being taken.
Private Debt Fund: A managed pool of assets that lends money to companies, frequently small and middle market firms, potentially offering a higher rate of return than funds that invest in debt traded on the public market.
General Partner: Responsible for managing the private debt fund, with responsibilities including: selecting attractive credit opportunities, negotiating lending contracts, managing their execution, actively monitoring investments, renegotiating lending agreements in case of covenant breaches, and managing the execution of credit workouts and the realization of secondary market transactions.
Flexible Spending Account (FSA): A type of savings account offered as an employer benefit that allows individuals to save for certain out-of-pocket medical expenses. Taxes are not paid on withdrawals but, unlike Health Savings Accounts (HSAs), balances cannot be carried over year-to-year or after terminating from employment.
Home Equity Line Of Credit (HELOC): A revolving line of credit that offers homeowners access to a loan backed by equity in their home. Typically there is a set period – often 10 years – during which funds can be borrowed, and only interest on borrowed funds needs to be repaid during this period. After the ‘draw’ period ends, the loan is paid back, similar to a traditional mortgage, over another set period (which might be 10, 15, or even 20 years).
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This month we review the December blog articles. This quiz includes the following articles: Performance Advertising Guidelines For Investment Advisers Under the SEC’s New Marketing Rule, Simplify Decision-Making For Clients By Shifting The Perspective To Their Future Selves, How “Probability Of Success” Differs Between One-Time And Ongoing Financial Plans, and SECURE Act 2.0: Later RMDs, 529-to-Roth Rollovers, And Other Tax Planning Opportunities
Learning Objectives:
- Describe what types of communication are defined as advertisements under the first “prong” of the SEC’s Marketing Rule
- Explain the regulations regarding performance advertising in the SEC’s Marketing Rule
- Describe ways to help clients overcome ambivalence by shifting their perspective to their future self
- Explain how the implications of a Monte Carlo result change depending on whether the analysis is part of a one-time or ongoing plan
- Name how the provisions of SECURE Act 2.0 will impact retirement planning for individuals in the future
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 2.5 CFP hours
- 4.0 NASBA hours
- 2.5 IWI General Financial Planning hours
- 1.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
SEC Marketing Rule: An SEC regulation adopted in 2020 (and requiring compliance by November 4, 2022) that introduced new rules and revised existing rules for SEC-registered investment advisers, most notably allowing the use of third-party testimonials and endorsements.
Gross Performance: Investment returns that are reported without accounting for fees or expenses that would be paid by the client
Net Performance: Investment returns that are reported after accounting for fees and expenses paid by the client
Hypothetical Performance: Investment returns that are reported for a portfolio that does not actually exist in reality, but is instead calculated based on historical investment data, market assumptions, or other calculations, and is heavily scrutinized by the SEC for its potential to mislead investors.
Status Quo Bias: A cognitive effect whereby individuals prefer to stay in their current situation when faced with the possibility of change.
Monte Carlo – A type of probability-based analysis often used in retirement planning, which at a basic level calculates multiple iterations of a client’s projected income and spending over a specified time period while randomizing investment returns, with an output representing the percentage of iterations in which the client did (or did not) deplete their assets over the time period.
Probability of Success/Failure – The output of most Monte Carlo simulators found in financial planning software, which states the probability, based on the simulation results, that a client will (“Failure”) or will not (“Success”) run out of money during retirement.
Required Minimum Distributions – Distributions that are required by the IRS to be taken from most types of pre-tax retirement accounts upon reaching a specified age.
529 Plan – A type of account allowing for tax-advantaged savings for qualified educational expenses, including college, graduate school, and certain K-12 expenses.
Catch-up contributions – Certain additional contributions to IRAs and employer retirement plans (beyond the standard contribution limits) that are allowed for individuals age 50 or older.
Qualified Charitable Distribution – A distribution that is made directly from an IRA to a qualified charitable organization, which is allowed after age 70 ½ and can satisfy an individual’s RMD requirement and is excluded from their gross income.
Early Withdrawal Penalty – A 10% additional tax that is assessed on distributions from an IRA or employer retirement plan that are made before age 59 ½, unless the individual meets certain specified criteria for an exception to the penalty.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz includes the following articles: (1) Equity Compensation Planning as a Niche: Market Opportunities and Differentiated Value and (2) Investing a Roth IRA in Early Stage Growth Companies without Violating Prohibited Transaction Rules
Learning Objectives:
LO#1: Understand how to conduct valuation and investment risk analysis for clients with equity compensation
LO#2: Learn how to conduct tax strategy modeling for clients with equity compensation and the documents needed for this analysis
LO#3: Understand the Prohibited Transaction limitations for IRAs owning small businesses
LO#4: Learn how a client can legally move shares of an existing business into a Roth IRA
LO#5: Understand how an individual receiving compensation from a company owned by their IRA can create a Prohibited Transaction
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Equity Compensation: This is non-cash payment for services that provides ownership in a company. It is commonly offered to executives and key employees in addition to their pay and includes different forms of company stock.
Employee Stock Options: These give recipients the right (not the obligation) to buy company shares at a fixed price (known as the exercise or grant price).
Restricted Stock Options: Also referred to as share grants or performance shares, provide employees with shares of the company, but are subject to vesting criteria.
Stock Plan Service (SPS) Providers: Companies that provide both software and services to administer large corporate equity award programs
Prohibited Transaction Rules: IRS rules restricting an individual from using their IRA to engage in various types of transactions with certain “Disqualified Persons”.
Disqualified Person: The IRS prohibits an IRA from purchasing property from a Disqualified Person, which can include the IRA owner; the IRA owner’s spouse, ancestors, lineal descendants, and any spouse of a lineal descendant; or an officer or director (or person with similar responsibilities), 10% or more shareholder, or other individual who earns 10% or more of the wages, of a company that is owned 50% or more by the IRA owner and other disqualified persons (combined); or a business that is 50% or more owned by a Disqualified Person.
Prohibited Personal Compensation: When an individual’s IRA exercises control over a business, the IRA owner is no longer able to receive compensation personally from that business.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz reviews the following two blog articles: Why High Equity Valuations And Low Bond Yields Won’t (Necessarily) Break The 4% Rule and Maximizing The Step-Up In Basis By Gifting Assets Between Spouses.
Learning Objectives:
- Explain what the 4% Rule means and how it is meant to be implemented.
- Discuss why Morningstar’s recent research report recommends updating the traditionally referenced safe withdrawal rate of 4%.
- Understand how current market conditions are used to predict future safe withdrawal rates.
- Understand when assets in a decedent’s estate receive a step-up in basis.
- Explain how step-up in basis rules differ in separate property and community property states.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Safe Withdrawal Rate: The highest initial withdrawal rate, followed by withdrawals of the same dollar amount every year in subsequent years, that will never result in the retiree fully drawing down their portfolio over the specified time horizon, even in the worst possible market conditions.
Cyclically Adjusted Price-To Earnings (CAPE) or P/E 10 Ratio: A ratio used to value equities based on the real price to earnings data over 10 years.
Robert Shiller: 2013 Nobel Laureate and Yale University behavioral finance economist who compiled various historical stock market data sets and confidence indexes, and is known for his research on stock prices, asserting that the market is inefficient.
Monte Carlo Analysis: A method of assessing the probability of certain outcomes and success levels by analyzing a large number of separate trials, generally based on historical market returns.
Step-Up In Basis: The readjustment of an asset’s value when the asset has appreciated between the time it was purchased, and the time it is received by a beneficiary.
Community Property: Property acquired by two spouses during marriage and considered to be divided 50/50 between each spouse.
Separate Property: Property acquired (and owned) by only one spouse during marriage, typically as a gift (including inheritances) or brought into the marriage (acquired by one spouse prior to marriage).
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz includes the following articles: (1) Helping Clients To Make Corrections To Social Security Statements and (2) Help Clients to Reconstruct Lost IRA Basis to Avoid Double Taxation
Learning Objectives:
LO#1: Understand the advantages of reviewing Social Security statements.
LO#2: Examine how estimated benefits on the Social Security statements are calculated and to be able to explain that to clients.
LO#3: Identify the common ways in which IRA basis can be lost.
LO#4: Identify strategies to help clints recover lost basis either from IRS Form 8606 or from scratch.
LO#5: Understand the rules for the deductibility of IRA contributions
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Two-factor Authentication: A security feature, the two-factor authentication process is about proving your identity when logging into an online account. The first factor is correctly inputting the account owner’s password and username. The second factor is either a phone or email notification which normally requires putting an additional passcode into the system’s login screen.
COLA: COLA stands for Cost-of-Living Adjustment. This is an increase made to Social Security which counteracts the effects of inflation.
Social Security: This is a government benefit that helps older Americans, workers who become disabled, and families which a spouse or parent dies. This is not meant to be one’s only source of income, but it does replace a percentage of a worker’s pre-retirement income based on the worker’s lifetime earnings.
Inflation: This is the general increase in prices and/or which corresponds to the fall in purchasing power over time.
Retirement Age: On the Social Security statement, this term refers to the age when the individual actually stops working.
Full Retirement Age: Depending on when you were born, Full Retirement Age (FRA) FRA is when you become eligible for your full Social Security benefit. FRA rises over time.
Traditional IRA: An individual retirement account (IRA) that allows individuals to contribute pre-tax dollars that grow tax-deferred until withdrawal. Withdrawals are then taxed at the individual’s income tax rate at the time of withdrawal.
Non-Deductible IRA contribution: A contribution to a traditional IRA which is made with after-tax dollars and thus receives no upfront tax deduction. The contribution itself is tax-free when it is withdrawn, but any growth of those funds over time is tax-deferred and taxable upon withdrawal.
Basis: This the original cost paid for an investment, which can be different from the actual value of the investment at the time of sale.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz highlights a series of articles surrounding questions and other critical communication skills that advisors will want to consider in order to deepen and enrich client relationships through the financial planning process.
Learning Objectives:
- Describe how the three meeting skills of preparing, managing, and listening are essential to create a positive client meeting experience.
- Be familiar with resources for newer advisors to help them practice honing their meeting skills.
- Discuss how advisors can use ‘true’ follow-up questions to demonstrate responsiveness to clients.
- Describe four types of direct indexing and when using each type of strategy makes the most sense.
- Explain how asking prospects “Why now?” can help advisors demonstrate the value of behavioral coaching.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Follow-Up Question: A question that is used with the sole purpose of understanding the speaker better.
Behavioral Coaching: In the context of financial planning, the process of helping clients make rational financial decisions and follow through on their priorities.
Passive Listening: Nonverbal form of communication involving attention to body language and eye contact.
Active listening: Listening that involves distilling information received from the speaker and reiterating the message back, to acknowledge the message was received and to assure the speaker that it was understood correctly.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz includes the following articles: Adjusting Monte Carlo Success Thresholds By Tolerance For Spending Volatility, Getting Comfortable Delaying Social Security With Six-Month ‘Reversible’ Delays, and Analyzing Net Unrealized Appreciation (NUA) Opportunities For Privately Held Company Employee Stock Ownership Plans (ESOPs)
Learning Objectives:
LO #1: Understand the rules for retroactively claiming Social Security Benefits.
LO #2: Discuss how advisors can use 6-month ‘delay nudges’ to help clients make good decisions around claiming their Social Security benefits.
LO #3: Understand how (and when) employees of private companies can take advantage of NUA, and when alternate strategies should be considered when using NUA is not the best option for the individual.
LO #4: Understand the limitations of using a default probability-of-success target for all client plans.
LO #5: Identify how dynamic probability of success targets can be chosen for client plans.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Average Indexed Monthly Earnings (AIME): Metric used to calculate an individual’s Social Security benefit, calculated by taking the average of the 35 highest-earning years, indexed for wage inflation.
Full Retirement Age (FRA): The age at which an individual is entitled to 100% of their Social Security benefits, and generally ranges between age 66 and age 67, depending on the individual’s date of birth.
Lump-Sum Distribution: Withdrawal of the entire balance owned by an individual who is a plan participant of their employer’s qualified retirement plan. The distribution must take place within a single tax year, and generally takes place only after the participant leaves the company, reaches age 59 ½, becomes permanently and totally disabled, or dies.
Monte Carlo Analysis: A method of assessing the probability of certain outcomes and success levels by analyzing a large number of separate trials, generally based on historical market returns.
Net Unrealized Appreciation (NUA): Appreciation of the employer’s company stock held in an individual’s retirement plan sponsored by the employer
NUA Triggering Event: One of three conditions that must be met in order for a NUA transaction to take place.
Risk tolerance: How much risk a client is willing to tolerate.
Sequence of Return Risk: a phenomenon which reveals that even if long-term returns average out in the long run, it doesn’t necessarily mean the portfolio can sustain ongoing withdrawals with volatile returns in the meantime.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz reviews two blog articles on the subject of Monte Carlo analysis and framing probability-of-success results for more effective client communication and outcomes. The quiz includes the following two articles: Why 50% Probability Of Success Is Actually A Viable Monte Carlo Retirement Projection and Reducing Retirement “Outage” Risk with Adjustment-Based Planning and Communication.
Learning Objectives:
- Understand some of the drawbacks of Monte Carlo analyses.
- Examine the differences in behavior, income, and end-of-retirement totals using different Monte Carlo probabilities of success.
- Review the ways to discuss Monte Carlo analyses and address client psychology issues using positive frames.
- Understand the limitations of framing and the implications of considering retirement plans only in the context of probability of success or failure.
- Identify other risk considerations, like outrage, and learn how to discuss them with clients.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Monte Carlo Analysis: A method of assessing the probability of certain outcomes and success levels by analyzing a large number of separate trials, generally based on historical market returns.
Perception: Related to our senses, this is what we are aware of and how we interpret sensory inputs, often guided by mental models.
Risk: The possibility of an outcome that is different from what is expected/desired. It is an inherent characteristic of all investment portfolios and a concept that Monte Carlo analyses are used to help a client understand.
Framing: Whether positive or negative, how an event is described or an outcome is incredibly powerful in shaping how clients feel about the result.
Magnitude of Failure: This is how large the potential change in income or spending may need to be adjusted. It is not well addressed with the basic probability of success/failure models.
Memorable risks: These are the risks or events that stick in your mind. They evoke vivid mental images.
Hazard: This describes the objective risk of a behavior or event.
Outrage: This describes the subjective risk of a behavior or event.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This quiz covers questions and strategies advisors can employ with clients experiencing crisis. Crisis can include things like losing a spouse or market event, or even just being anxious around an expected financial change.
Learning Objectives:
- Identify the use of purpose of narrative therapy.
- Understand how ‘audience questions’ can help clients respond to stressful financial situations.
- Discuss some of the communication challenges for advisors working with newly widowed clients.
- Describe strategies advisors can use to stay connected with newly widowed clients.
- Identify questions to ask and meeting processes for newly widowed clients.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Narrative Therapy: A process that focuses on finding and using words to create or modify the stories an individual tells themselves to help change the way they may see a certain issue.
Audience Question: A type of question used to generate new perspectives and potentially new ideas for solving a problem; for example, asking an individual how they would recommend that a friend solve the problem at hand.
End-Of-History Illusion: The expectation that a person will undergo relatively little change in the future.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This month we review the November blog articles. This quiz includes the following articles: Maximizing Health Savings Accounts (HSAs) Tax Benefits With Adult Children Under Age 26, Establishing Solo 401(k) Plans For Self-Employed Workers: Options, Contribution Limits, Deadlines, And More!, and Tax Advice Restrictions For Financial Advisors: How To Offer Tax Planning And Remain In Compliance
Learning Objectives:
1. Explain the requirements for an adult child to establish a Health Savings Account (HSA).
2. Discuss the features of High-Deductible Health Plan (HDHP) coverage and Planned Provider Organization (PPO) plans, and when it makes sense for an individual or family to choose one over the other.
3. Describe the features and benefits of implementing a Solo 401(k) plan for self-employed workers.
4. Distinguish between tax advice and tax planning.
5. Explain how financial advisors who are not designated tax professionals can best offer tax planning recommendations for clients.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate
Recommended CPE:
- 2.0 CFP hours
- 2.0 NASBA hours
- 2.0 IWI General Financial Planning hours
- 2.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
Health Savings Account (HSA): A savings account that receives favorable tax treatment when distributions are used to pay for medical expenses. Contributions are tax-deductible, growth is tax-deferred, and withdrawals used to pay for (qualified) healthcare expenses are tax-free. In order to contribute, an individual must be covered by an HSA-eligible HDHP and have no other health coverage, may not be enrolled in Medicare, may not be claimed as a dependent on someone else’s tax return.
High-Deductible Health Plan (HDHP): A healthcare plan that has a higher deductible requirement than a traditional health insurance plan. In order to be an HSA-eligible HDHP, a plan must have a minimum annual deductible and a maximum annual out-out-pocket amount that meets the limits set by the IRS.
Medicare: The Federal health insurance program for individuals 65 and older. In some cases, younger individuals with disabilities also qualify.
Solo 401(k) Plan: Retirement plan similar to a traditional 401(k) plan but restricted to self-employed business owners with no employees other than themselves (with the exception of the business owner’s spouse as the only other employee). The business owner may make contributions as an employee (with an annual limit of the smaller of 100% of compensation or up to $20,500 in 2022), and as an employer (up to 25% of their compensation).
Form 5500-EZ: IRS Form titled “Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan” that must be submitted annually by certain retirement plan owners, including single-participant plans.
Tax Advice: making a recommendation of a plan of action on a tax strategy. This is in contrast to tax planning, which does not involve making a recommendation.
Tax Planning: the consideration, analysis, and/or projection of tax strategies without taking the step of making a recommendation. This is in contrast to tax advice, which does involve making a recommendation.
Tax Avoidance: the provision of tax-related recommendations that are designed to (legally) minimize the amount of taxes paid by an individual.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Session Description:
This quiz includes the following articles: How To Register Your RIA: State Vs SEC Registration And When Notice Filing Is Required and Upfront And Ongoing RIA Compliance Obligations Of State Vs SEC-Registered Investment Advisers
This course covers the obligations of IARs for registering their RIA and their ongoing compliance obligations once registered, including allowed marketing activities, rules for advisory agreements, and fee disclosures.
This course is NOT applicable for CFP credit.
Learning Objectives:
1. Distinguish between the definitions of “Investment Adviser” as provided by the Federal Investment Advisers Act of 1940, and the model securities act for state registration (Uniform Securities Act of 2002).
2. Discuss the exemptions that allow an RIA to register under the SEC.
3. Explain when a state-registered adviser may need to notice file in a state.
4. Discuss the main differences between the requirements for investment advisors to apply for Federal versus state registration.
5. Describe the main parts of Form ADV and other documents that investment advisers must complete and submit to the SEC (for Federally registered advisers) and to their respective states (for state-registered advisers).
Level of Complexity:
-IWI: Intermediate
-NASBA: Basic
Specialized Knowledge:
- NASAA: Quality and accuracy of communications with clients and prospects
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 0.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Key Terms:
Form ADV: Foundational registration documents that must be submitted by any investment adviser seeking to become registered with the SEC or the states.
Form U4: Document used to establish an individual’s registration with applicable states as an Investment Adviser Representative (IAR) of a registered investment adviser.
Investment Adviser: As defined by the Advisers Act, “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities”. The investment adviser generally refers to the firm (entity).
Investment Advisers Act of 1940 (“the Advisers Act”): Federal law that places certain requirements and restrictions on investment advisers pertaining to registration, compensation, and creation of advisory agreements.
Notice Filing: Requirement imposed on certain SEC-registered investment advisers to provide applicable state securities authorities copies of documents that are filed with the SEC, along with any applicable fees.
Supervised Person: As defined by the Advisers Act, any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser.
Uniform Securities Act of 2002 (“the 2002 Act”): model securities act created by the Uniform Law Commission, which many states use to model their own securities acts to place certain requirements and restrictions on investment advisers doing business in their state, pertaining to registration, compensation, and creation of advisory agreements.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
Session Description:
This month we review the October blog articles. This quiz includes the following articles: Automated Tax-Loss Harvesting Technology: Is The Value Overstated?, Add Value To Client Relationships And Uncover New Goals By Asking: “What’s Possible Now?”, and Why The Value Of A Roth Conversion Is Calculated Using (True) Marginal Tax Rates
Learning Objectives:
- Explain the three categories of tax planning gaps that represent the types of information missed by automated tax-loss harvesting systems.
- Discuss how advisors can add value to their client relationships by encouraging them to consider new goals.
- Explain why asking clients to consider new goals is best done when the client is feeling financially stable and is not working through any major financial planning issues.
- Explain why an analysis of Roth conversions examining tax brackets alone can be insufficient to determine whether a taxpayer should choose to make a Roth conversion or not.
- Describe the add-on effects of Roth conversions and how a taxpayer’s total tax liability can be impacted by these effects.
Level of Complexity:
-CFP/IWI: Intermediate
-NASBA: Basic
Specialized Knowledge:
- CFP: General Principles Of Financial Planning, Professional Conduct & Regulation, Psychology of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: Quality and accuracy of communications with clients and prospect, Sufficiency and accuracy of financial report
Recommended CPE:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 1.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Tactical Tax-Loss Harvesting – Tax-loss harvesting strategy that focuses on identifying when the investor’s tax circumstances make it likely that they will realize significant value from doing so, capturing only the losses that will benefit the strategy and leaving alone all the losses that won’t impact the strategy.
Automated Tax-Loss Harvesting – Technology-dependent processes using algorithms to detect tax-loss-harvesting opportunities and making the subsequent trades without any human review.
Arrival Fallacy – the often misconstrued idea that reaching a desired outcome is more enjoyable than the process involved in progressing toward the outcome, as the process along the way is often more enjoyable than the final outcome.
Roth Conversion – The transfer of assets from a traditional IRA, SEP IRA, or SIMPLE IRA into a Roth IRA. Taxes are due on the amount in the year the assets are converted, but can grow tax-free in the Roth account after conversion.
Tax Equivalency Principle – The principle that the value of tax-free growth in a Roth account is equivalent to the value of the upfront tax deduction taken for a contribution to a traditional retirement account, assuming that tax rates stay the same over time.
Marginal Tax Rate – The tax rate that applies only to each additional dollar earned as income.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Nerd's Eye View
Session Description:
This month we review the September blog articles. This quiz includes the following articles:
Tax-Loss Harvesting Best Practices (And How To Scale It Across A Client Base), Asking The Toughest Kinder Question: How To Help Clients Explore Regret Productively And Take Action, Why Checklist-Style Financial Planning Works: What Advisors Can Learn From Dave Ramsey’s Baby Steps, and The Most Tax-Friendly States For Retirees: How To Compare State Income Tax Options For Retiring Clients.
Learning Objectives:
1. Discuss some of the factors to consider to determine when tax-loss harvesting for a client would make sense.
2. Explain how George Kinder’s 3rd Life Planning question is used to help clients explore their regrets in a productive way to identify goals.
3. Describe some of the benefits for clients when using a checklist-style approach to financial planning.
4. Identify the four categories that are used to describe the tax friendliness of U.S. states.
5. Describe how financial advisors could systematically assess state income tax options for their retiring clients.
Level of Complexity:
-CFP/IWI: Intermediate
-NASBA: Basic
Specialized Knowledge:
- CFP: General Principles Of Financial Planning, Professional Conduct & Regulation, Psychology of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: Quality and accuracy of communications with clients and prospect, Sufficiency and accuracy of financial reports
Recommended CPE:
- 2.0 CFP hours
- 3.0 NASBA hours
- 2.0 IMCA General Financial Planning hours
- 2.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
Wash Sale – sale that occurs when a security is sold for a loss, and a purchase is made for a substantially identical security within 30 days before or after the sale.
Wash Sale Rules – IRS rules that prevent taxpayers from claiming any tax deductions for losses arising from wash sales.
Tax-Loss Harvesting – a strategy that relies on the deliberate sale of securities resulting in a capital loss so that capital gains (or to some extent, ordinary income) taxes can be reduced.
Tax-Bracket Arbitrage – strategies that rely on transactions that leverage the spread between tax rates.
George Kinder – founded the Kinder Institute of Life Planning and the Life Planning process for financial planners.
Life Planning – method used by financial advisors in which a financial plan is created based on an exploratory process involving 3 specific questions to help client’s evaluate their most essential goals
Unconditional Positive Regard – principle of client-centered therapy developed by Carl Rogers and Abraham Maslow based on “respecting the client as a human being with [their] own free will and operating under the assumption that [they are] doing the best they can.”
Tax Credit – amounts that reduce a taxpayer’s tax liability. Nonrefundable credits do not offer credit beyond the taxpayer’s liability (i.e., they may reduce the tax due to zero, but will not result in a refund). However, refundable credits can result in a refund payment if the credit exceeds the tax due.
Tax Deduction – amounts that reduce a taxpayer’s income. Above-the-line deductions reduce Adjusted Gross Income (AGI); below-the line deductions subtract from AGI to calculate taxable income
Tax Exemption – an above-the-line allowance that permits certain amounts of certain types of income to be excluded from taxation.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Nerd's Eye View
Session Description:
This month we review the August blog articles. This quiz includes the following articles:
Title: Why Childfree People Require A Unique Financial Planning Process, How To Manage Strong Emotions When Asking Clients Kinder Life Planning Questions, Advisory Agreement Statutory Requirements: What Advisors Need To Know To Stay Compliant, and Drafting RIA Advisory Agreements: Best Practices And Essential Elements To Include
Learning Objectives:
- Explain the difference between Childfree and childless individuals, and understand the unique needs of Childfree financial planning clients.
- Understand how the second Kinder Life Planning question helps clients contemplate future goals by exploring their values and priorities.
- Understand the statutory requirements for RIA advisory agreements and what to include in the agreement when describing an RIA’s services and fees.
- Describe the essential elements of an advisory agreements, including how to identify the client and effective date of the agreement.
- Explain disclosure responsibilities for the RIA and client and the language around both parties’ rights and responsibilities in the event of a dispute.
Level of Complexity:
-CFP/IMCA: Intermediate
-NASBA: Basic
Specialized Knowledge:
- CFP: General Principles Of Financial Planning, Professional Conduct & Regulation, Psychology of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: Quality and accuracy of communications with clients and prospects
Recommended CPE:
- 2.0 CFP hours
- 3.0 NASBA hours
- 2.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 2.0 IAR PP Hours
Key Terms:
Childfree – not currently having children and not ever planning on having children.
George Kinder – founded the Kinder Institutute of Life Planning and the Life Planning process for financial planners.
Life Planning – method used by financial advisors in which a financial plan is created based on an exploratory process involving 3 specific questions to help client’s evaluate their most essential goals
Investment Advisers Act of 1940 (“the Advisers Act”) – law that places certain requirements and restrictions on investment advisers pertaining to registration, compensation, and creation of advisory agreements.
Section 205 of the Advisers Act – Section that deals with investment advisory contracts, with a focus on charging performance-based fees, client consent to the assignment of agreement, and partnership change notifications.
Advisory Agreement – The legal contract between an advisor and a client that usually outlines (among other things) the scope and nature of the relationship, advisory fees charged, disclosure responsibilities, and steps for resolving disputes
Performance-Based Fee – An investment advisory fee that represents a share of the investment return on the client’s portfolio, and which is generally prohibited unless the client meets specific qualification criteria
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
Program Description:
This Blog Quiz is only available for IRS EA credit.
This quiz reviews two blog articles : Maximizing The Step-Up In Basis By Gifting Assets Between Spouses, and Strategies For Maximizing (Or Minimizing!) Rule 72(t) Early Distribution Payments Using IRS Notice 2022-6.
Learning Objectives:
- Understand when assets in a decedent’s estate receive a step-up in basis.
- Explain how step-up in basis rules differ in separate property and community property states.
- Describe some of the issues involved in transferring assets to an individual enrolled in Medicaid.
- Understand how recent IRS guidance affects the calculations of 72(t) payments.
- Discuss what type of clients would benefit most from 72(t) payments and how best to implement strategies that use them.
Recommended CPE:
This Blog Quiz is only available for IRS EA credit.
- 0.0 CFP hours
- 0.0 NASBA hours
- 0.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 0.0 IAR PP Hours
- 1.0 IRS EA Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Nerd's Eye View
- Taxes
Program Description:
This Blog Quiz is only available for IRS EA credit.
This quiz reviews two blog articles: The Impact Of New IRS Proposed Regulations On The SECURE Act: RMDs, Eligible Designated Beneficiaries, Trusts, And More! and Net Unrealized Appreciation Tax Strategies.
Learning Objectives:
- Discuss how the proposed regulations clarify the SECURE Act’s rules regarding 10-year distribution requirement for inherited retirement accounts.
- Understand who would qualify as an Eligible Designated Beneficiary under the proposed regulations related to the SECURE Act.
- Explain how trust beneficiaries of retirement accounts would be treated under the SECURE Act.
- Describe the rules that must be followed for a Net Unrealized Appreciation transaction to potentially reduce an individual’s tax liability.
- Understand the circumstances where a taxpayer could most benefit from a Net Unrealized Appreciation.
Recommended CPE:
This Blog Quiz is only available for IRS EA credit.
- 0.0 CFP hours
- 0.0 NASBA hours
- 0.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 0.0 IAR PP Hours
- 1.0 IRS EA Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Nerd's Eye View
Session Description:
This month we review the July blog articles in two quizzes. This quiz includes the following articles: Sabbatical Financial Planning: How To Help Clients Maximize Opportunities And Minimize Risks, and How To Use George Kinder’s 3 Life Planning Questions With Financial Planning Clients
Learning Objectives:
- Determine the impact that a planned extended period of time off from work would have on a client’s long-term financial future
- Identify financial planning opportunities for when a client plans to take an extended sabbatical
- Describe the purpose for asking clients George Kinder’s ‘Dream of Freedom’ question
- Define what a socially constructed goal is and how it can be used to help clients better define and understand their goals
- Illustrate strategies to prepare clients for unexpected or emotional questions
Level of Complexity:
-CFP/IMCA: Intermediate
-NASBA: Basic
Specialized Knowledge:
- CFP: General Principles Of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: Quality and accuracy of communications with clients and prospects
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Sabbatical – a period of time in which a person takes an extended break from work, lasting anywhere from 1 to 12 months (or longer)
Straight-line cash flow projections – A multiyear financial projection that assumes a single, constant rate of return on investments (along with a constant rate of increase for income and expenses)
Roth Conversion – when funds from a pre-tax retirement account such as a Traditional IRA are transferred into a Roth account. Any tax-deferred amounts that are converted are treated as taxable income and are subject to ordinary income tax
Life Planning – A style of financial planning that focuses on discovering the client’s deepest and most profound life goals, as pioneered by George Kinder and taught by the Kinder Institute of Life Planning
Dream Of Freedom Question – A question asked by advisors as part of the Life Planning process that asks how the client’s life would change if they had enough money to take care of all their current and future needs
Socially Constructed Goal – A goal that is developed through dialogue between two people (e.g., an advisor and client) that creates a shared understanding of the goal between both parties
Stickiness – The tendency of a client to stay loyal to a particular advisor on account of the client’s trust in the advisor and the value they get from the relationship
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Nerd's Eye View
Session Description:
This month we review the June blog articles in two quizzes. This quiz includes the following articles: How To Use Economic Context In Retirement Income Decision-Making and When Roth Conversions Go ‘On Sale’: Discounted Roth Conversions During A Bear Market Decline.
Learning Objectives:
- Identify relevant economic factors that provide useful information for creating retirement plans for clients.
- Understand how to communicate economic context to clients when discussing retirement planning strategies.
- Explain how the impact of bear markets on Roth accounts can make Roth conversions more attractive.
- Discuss tax circumstances that can make a Roth conversion less attractive.
- Learn about strategies for managing the timing for implementing Roth conversions.
Level of Complexity:
- CFP/IWI: Intermediate
Specialized Knowledge:
- CFP: Retirement Savings & Income Planning
- NASAA: Other
Recommended CPE:
- 1.0 CFP hours
- 0.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Price-To-Earnings (P/E) Ratio – valuation measure that calculates a company’s share price to its earnings per share.
Cyclically Adjusted Price-to-Earnings (CAPE) Ratio – valuation measure that calculates the share price of an asset (generally broad equity indices) divided by the average inflation-adjusted earnings over a given period, usually 10 to 20 years. The Shiller P/E Ratio is a 10-year CAPE ratio.
Retiree Nest Egg – the savings earmarked for retirement that individuals accumulate over a given period of time.
Roth Conversion – when funds from a pre-tax retirement account such as a Traditional IRA are transferred into a Roth account. Any tax-deferred amounts that are converted are treated as taxable income and are subject to ordinary income tax.
Roth-Conversion-Cost Averaging – Roth converting a designated amount over several, regular intervals during the course of the year, instead of all at once.
Roth IRA Conversion Barbelling – Roth converting a certain amount, typically at the beginning of the year, and waiting to convert the remaining amount closer to the end of the year when the individual’s tax picture is clearer, providing flexibility over the final full-year conversion amount.
Qualified Charitable Distribution (QCD) – distributions that can be made to certain charitable organizations directly from a taxable IRA by individuals who are age 70½ or older. They can be used to satisfy an individual’s Required Minimum Distribution.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- Ethics
Session Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This program reviews the articles Why XYPN Is Petitioning The SEC To Implement Title Reform Under Section 208(c) and Why Series 7 Brokers Legally CAN’T Be Client Fiduciaries Without DoL Fiduciary. This course addresses how the Investment Advisers Act oversees the roles of investment advisers and sales representatives, and how the Department of Labor Fiduciary Rule applies to different investment professionals.
Learning Objectives:
LO #1: Have a basic understanding of the history of financial planning legislation.
LO #2: Describe the differences between an investment adviser and broker-dealer.
LO #3: Discuss the purpose of Regulation Best Interest.
LO#4: Explain why a Series 7 licensee can’t technically be a fiduciary.
LO#5: Understand the purpose of the Department of Labor Fiduciary Rule.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Regulatory Ethics
- NASAA: Ethics, Professional Responsibility
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Course Review Date:
6/7/2022
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Key Terms:
N/A
Why XYPN Is Petitioning The SEC To Implement Title Reform Under Section 208(c):
Why XYPN Is Petitioning The SEC To Implement Title Reform Under Section 208(c)
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Session Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This program reviews the articles Virtual Staff Cybersecurity Requirements: Compliance Issues When Adding New Employees Or Contractors and Are The Accredited Investor Rules Unfairly Limiting Access To Good Investment Opportunities?
Learning Objectives:
LO #1: Understand what an investment adviser representative is.
LO #2: Define an access person.
LO #3: Understand the definition and requirements for accredited investors.
LO#4: Discuss the purpose of accredited investor rules that businesses must follow.
LO#5: Assess how accredited investor rules can be improved.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Regulatory Ethics
- NASAA: Ethics, Professional Responsibility
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Course Review Date:
6/7/2022
Key Terms:
N/A
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Session Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This quiz includes articles from July of 2020 and August of 2017: (1) How Rising ETF Investing By RIAs Triggers The SEC’s 13F Reporting Requirements, and (2) The New Custody Rule Requirements For Advisors With Third-Party SLOA Authority. The SEC’s 13(f) ruling was put in place to 1) create uniform reporting standards and a central repository of historical and current data about the investment activities of institutional investment managers, and 2) inform public policymakers regarding the influence and impact of institutional investment mangers on the securities market. As such, understanding how and why to correctly report this information is key for the industry and professional responsibility.
Learning Objectives:
LO #1: Examine the intricacies of the 13F reporting requirements and SEC law.
LO #2: Identify expectations for 13F reporting requirements.
LO #3: Identify strategies to mitigate the difficulty of the reporting process.
LO #4: Understand what it means to have SLOA authority – standing letter of authorization and the historical context surrounding the ethics of this issue.
LO #5: Identify the conditions in which advisors who have SLOA authority would be required to have an annual surprise exam conducted.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Regulatory Ethics
- NASAA: Ethics, Professional Responsibility
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Course Review Date:
6/7/2022
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Key Terms:
N/A
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Session Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This quiz includes articles from August of 2019 and March of 2017: (1) Fee Severability: The Next Big Issue in The Regulation Of Financial Planner Compensation And (2) On the Bleeding Edge of Financial Planning Fee-For-Service Regulation. As part of ethics as well as professional responsibility there are few things more important to the financial advisor and consumer relationship than being able to describe fees and have a confident fee discussion. Financial planners need to be able to describe their fees and the work associated with those fees in order to inform clients and create transparency and simplicity for the client as it concerns the fees and the way that they are charged to the consumer.
Learning Objectives:
– LO #1: Identify the key regulatory distinction between a retainer fee and a fixed fee.
-LO #2: Identify the ways in which both severability and saliency can play a role in consumer protection regulation.
-LO #3: Understand what reverse churning is and its impact on fees and service models.
-LO #4: Understand the fee severability rules related to timing, fees, and service expectations.
-LO #5: Understand how consumers are impacted psychologically by different types of fee models as it relates to salience of fees.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Regulatory Ethics
- NASAA: Ethics, Professional Responsibility
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Course Review Date:
6/7/2022
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Key Terms:
N/A
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Program Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This quiz includes articles from August 2021 and November 2021: Navigating Minimum Net Capital And Surety Bond Requirements For State-Registered RIAs and How Financial Advisor Titles Shape Consumer Perceptions. The course’s content addresses ethics and professional responsibility as it pertains to an advisor’s responsibility to remain financially solvent in accordance with state regulations and to accurately portray their services and duties to their clients in their titles and disclosures.
Learning Objectives:
-LO #1: Discuss the requirements for many state-registered investment advisers to ensure a minimum level of assets available in the event of a legal claim from the RIA’s clients.
-LO #2: Understand the difference between minimum net capital and surety bond requirements.
-LO #3: Learn about what empirical research demonstrates about the effects of advisor titles and disclosures on consumers’ perception of the roles and obligations of financial professionals
-LO #4: Discusses how various regulatory approaches to advisor titles might improve consumer clarity
-LO #5: Understand several proposed Federal and state regulations of financial advisor titles.
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- IWI: Ethics
- NASBA: Regulatory Ethics
- NASAA: Ethics, Professional Responsibility
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 1.0 IWI Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Course Review Date:
6/7/2022
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Key Terms:
N/A
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
N/A
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Session Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This quiz includes the following article from June of 2019: Advisor’s Guide To The SEC’s Final Regulation Best Interest And Form CRS. The course’s content addresses ethics and professional responsibility as it pertains to an advisor’s responsibility to avoid or disclose conflicts of interest and remain compliant with SEC regulations (and those of any states that choose to adopt the Federal regulations).
Learning Objectives:
-LO #1: Learn the obligations for broker-dealers to act in the best interests of their client when making investment recommendations under the SEC’s Regulation Best Interest rule.
-LO #2: Understand the requirements for the new Form CRS that broker-dealers and SEC-registered RIAs are required to provide to potential clients.
-LO#3: Explain the clarification of RIAs’ fiduciary duty to clients that was released alongside the Regulation Best Interest rule.
-LO#4: Understand the SEC’s re-interpretation of the “solely incidental advice” exemption for broker-dealers to provide advice without needing to register as an investment adviser.
-LO#5: Explain an advisor’s responsibility to avoid or disclose conflicts of interest and remain compliant with SEC regulations.
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 1.0 IMCA Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Ethics
- Nerd's Eye View
Session Description:
This program is not applicable to CFP Ethics requirements. Completion will award general CE hours for CFP.
This program reviews the article Advertising With Testimonials And Endorsements Under The New SEC Marketing Rule. The article covers the the SEC’s new marketing rule and its implications for financial advisors, including what is defined as an “advertisement” under the rule, the enumerated prohibitions on RIA advertising, the new regulations applicable to testimonials and endorsements under the new rule, and the rule’s provisions regarding advertisement of third-party ratings. The session addresses ethics as pertains to remaining compliant with Federal and state securities laws and avoiding false or misleading statements in communications and advertising.
Learning Objectives:
LO #1: Understand the new rules for advisor marketing.
LO #2: Examine the implications of the new marketing rules for advisors who want to use endorsements or advertising.
LO #3: Understand the vocabulary associated with the new advertising rules.
LO #4: Understand the seven general violations to avoid with RIA advertising compliance under the new rules.
LO #5: Learn the required disclosures for an RIA promoter providing a testimonial or endorsement.
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 1.0 IMCA Ethics hours
- 1.0 IAR EPR Hours
- 0.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Investments
- Retirement Planning
Program Description:
This month we review the April blog articles in two quizzes. This quiz includes the following articles: Simplifying Retirement Income Planning Visualization Using The ‘Spending Risk Curve’ and The RISA Framework: A Systematized Approach To Personalizing Retirement Income Strategies For Clients.
Learning Objectives:
- Understand why visualizations are important tools for communicating information to clients
- Learn how spending risk curves work and how to use them in the planning process
- Identify the style factors used to determine client retirement income preferences
- Learn methods for assessing client retirement income preferences
- Understand how to identify suitable retirement solutions based on retirement income style preferences
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Retirement Savings and Income Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Investments
- Retirement Planning
Program Description:
This month we review the April blog articles in two quizzes. This quiz includes the following articles: Questions Advisors Can Ask To Help Their Clients Take Action By Exploring Their Money Memories and 8 Inflation Conversations To Have With Clients
Learning Objectives:
- Describe why money memory conversations can be a valuable tool for understanding a client’s financial behavior and psychology.
- Understand how advisors can best engage in money memory conversations with clients.
- Learn how to help clients calculate their own personal inflation rate.
- Describe ways advisors can help protect their savings for retirement and other long-term goals against inflation.
- Learn about insurance and tax planning opportunities related to dealing with inflation.
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- General Planning
- Investments
- Taxes
Program Description:
This month we review the March blog articles in two quizzes. This quiz includes the following articles: The Impact Of New IRS Proposed Regulations On The SECURE Act: RMDs, Eligible Designated Beneficiaries, Trusts, And More! and Strategies For Maximizing (Or Minimizing!) Rule 72(t) Early Distribution Payments Using IRS Notice 2022-6.
Learning Objectives:
LO #1. Understand the proposed changes to the SECURE Act’s 10-year rule for inherited IRAs
LO #2. Explain how the proposed regulations would affect who qualifies as an Eligible Designated Beneficiary
LO #3. Discuss how trust beneficiaries of retirement accounts would be affected by the proposed regulations
LO #4. Understand how recent IRS guidance affects the calculations of 72(t) payments
LO #5. Discuss what type of clients would benefit most from 72(t) payments and how best to implement the strategy
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Tax Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 1.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- General Planning
- Investments
Program Description:
This month we review the March blog articles in two quizzes. This quiz includes the following articles: Asking ‘Have You Worked With An Advisor Before?’ To Uncover What Prospects Really Value Most, The 30-Minute Prospect Meeting: A Framework And Agenda That Convert By Focusing On The Prospect’s (Immediate) Problem, and The ‘Yield-Split’ Method Of Asset Location To Improve Tax Efficiency Of Index Funds
Learning Objectives:
LO #1. Understand why it is valuable to learn about a prospect’s previous relationships with financial professionals.
LO #2. Describe why asking prospects about their personal memories and attitudes could make them nervous or defensive.
LO #3. Explain what an advisor can do in the initial meeting to help prospects understand how the advisor can solve their problems.
LO #4. Describe how implementing an asset location strategy can be valuable for financial planning clients
LO #5. Explain how a yield-split asset location strategy can add tax efficiency to a client’s portfolio
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- Debt & Liabilities
- General Planning
Session Description:
This month we review the January blog articles in two quizzes. This quiz includes the following articles: Credit Card Rewards Strategies: How To Maximize Benefits And Add Client Value and Reducing Digital Miscommunication By Setting Clear Expectations And Appropriate Tone
Learning Objectives:
LO #1. Identify advantages and disadvantages of different types of credit card reward strategies.
LO #2. Understand how to compare different credit card reward programs.
LO #3. Discuss how spending habits can be assessed to help select appropriate credit card reward strategies.
LO #4. Explain the unique challenges of digital communication that are not an issue with verbal communication.
LO #5. Discuss the importance of tone and expectation when communicating through digital media.
Key Terms:
Egocentrism: The tendency to consider one’s own point of view to be universally shared by others. This makes it difficult for individuals to clearly understand another person’s point of view unless it is clearly communicated.
Tone: With respect to digital communication, this is the attitude of the sender towards the recipient and the topic of the message, as implicitly expressed through the use of the language used in the message.
Emoji: Small digital images representing faces, animals, foods, activities, etc. that can be inserted into inline text to express ideas and emotions, often used to provide emotional cues and tonal context to messages.
Credit Card Rewards Program: Incentive programs offered by many credit card companies to encourage consumer spending and provide credit card users with benefits for their spending.
Cash Back Rewards: A credit card reward program that offers cash back, often in the form of statement credits, to credit card users for spending with their credit card.
Travel Point/Mile Rewards: A credit card reward program that offers points or ‘miles’ for spending, for users to redeem toward airfare, lodging, and related expenses incurred with certain carriers/hotels.
Transferrable Point Rewards: A credit card reward program that offers points that can be redeemed for a variety of uses, including cash back credit, travel expenses, or other particular offers.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- General Planning
Session Description:
This month we review the December blog articles in two quizzes. This quiz includes the following articles: Using A Financial Purpose Statement To Guide Mindful Spending Decisions and Addressing Financial Advisor Anxiety To Help Prospects Overcome Their Fear Of Judgment
Learning Objectives:
LO #1. Discuss how financial purpose statements can be used by clients to prioritize goals.
LO #2. Explain what conspicuous consumption is, and why awareness of spending is important to avoid it.
LO #3. Identify exercises that can be used with clients to help them explore their personal values.
LO #4. Explain the main causes of Financial Advisor Anxiety.
LO #5. Describe techniques that can be used to alleviate Financial Advisor Anxiety.
Key Terms:
Financial Purpose Statement: A simple statement that helps an individual crystallize the purpose of money in their life and to examine their relationship with money with respect to their most meaningful goals.
Conspicuous Consumption: Spending in a way that a person believes will signal their status, so that other people will notice them.
Social Comparison: Behavior that involves examining external cues in our environment to help us identify appropriate behavior to emulate. This can be applied to spending behaviors, which can result in using money in ways that are not in alignment with a person’s actual core values.
“Pain of Paying”: The discomfort or displeasure we tend to feel when we spend money, associating spending money with the loss of something valuable.
Money Mantra: A brief statement that an individual can quickly refer to that helps them remember why money is important to them and how it ties into their personal values.
Financial Advisor Anxiety (FAA): The anxiety a person may experience from the idea of having to disclose information about and being judged on their personal finances when meeting with a financial advisor.
Normalization: To make something normal. With respect to Financial Advisor Anxiety (FAA), normalizing a client’s fears means making it clear to the client that feeling fearful is completely normal and that there is nothing wrong with feeling that way.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Annuities
- General Planning
- Retirement Planning
Session Description:
This month we review the November blog articles in two quizzes. This quiz includes the following articles: Using Medicaid Annuities To Protect Retirement Assets When A Spouse Requires Long-Term Institutional Care and The Retirement Distribution “Hatchet”: Using Risk-Based Guardrails To Project Sustainable Cash Flows
Learning Objectives:
LO #1. Understand the basic eligibility rules for Medicaid.
LO #2. Explain how Medicaid Annuities can be used as a planning strategy for married couples to preserve assets when one needs Medicaid support.
LO# 3. Describe the downsides of Medicaid Annuities.
LO #4. Identify some of the pitfalls of retirement withdrawal-rate guardrail distribution strategies.
LO #5. Consider the benefits of holistic retirement risk-based guardrail distribution strategies.
Key Terms:
Medicaid: A partnership program offered by the Federal and state governments, designed to provide medical care to individuals and families who cannot afford such care on their own.
Countable Assets: Assets that Medicaid considers as an individual’s available resources when an application is submitted. It includes cash, investments, bank accounts, and real estate (subject to a limited exception for equity in a primary residence), and is limited to a certain amount as determined by each state.
Medicaid Annuity: An annuity that is designed to allow a married couple to convert Countable Assets (by purchasing and investing in the annuity) into income of the healthy spouse (through annuity payments made solely to the healthy spouse).
Look-Back Period: The period of time, generally five years, before an individual applies for Medicaid. If any Countable Assets are transferred or disposed for less than fair market value during this period, the individual will be subject to a penalty period, during which the individual will be ineligible for Medicaid.
Retirement Distribution Hatchet: a retirement portfolio profile that illustrates how retirement distribution rates are highest early in retirement, then significantly decline when Social Security is claimed, and falls further because of the tendency for overall spending needs to decline over time.
Retirement Spending Smile: The tendency for spending to gradually decline after retirement with an upturn closer to the end of the plan horizon.
Risk-Based Guardrails: A guardrails-based retirement spending strategy that corresponds to income risk. For example, adjustments to income are made when the plan’s target risk level, as determined by a risk metric measurement tool such as Monte Carlo analysis, reaches a certain percentage.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- General Planning
Session Description:
This month we review the November blog articles in two quizzes. This quiz includes the following articles: Optimizing Client Recommendations At The Right Behavioral Level Using A Synthesis-Based Approach and Making Fulfilling Financial Choices By Remembering Past Experiences
Learning Objectives:
LO #1. Discuss how both synthetic and analytic perspectives of a client’s situation can be useful in creating financial plans for them.
LO #2. Recognize how biases against synthetic approaches to financial planning can limit an advisor’s ability to provide relevant plans for clients.
LO #3. Describe the three types of utility involved in the decision-making process when assessing the potential satisfaction that can result from a decision.
LO #4. Explain how the Peak-End Rule can be used to help clients plan their futures.
LO #5. Identify the different phases of recollection involved with Remembered Utility.
Key Terms:
Synthetic Observation: A method of thinking that involves zooming out from the granular details to assess a more holistic overview of the situation.
Analytic Observation: A method of thinking that involves zooming in to the granular details to identify solutions to problems, and more efficient ways to address those problems.
Man of One Study: Reference to someone who is overly reliant on a single perspective or piece of evidence. This can be a potential pitfall of relying too much on analysis without incorporating some level of synthesis.
Expected Utility: Focusing on future outcomes to make decisions based on the subjective preference of what we think we will enjoy or will be most beneficial to us.
Experienced Utility: Focusing on the feelings associated with past experiences to make decisions.
Remembered Utility: Focusing on actual past experiences of some event, decision, or product (and the specific aspects of those things that brought us pleasure or displeasure) to make decisions.
Peak-End Rule: The tendency of only the peak and end events (opposed to the starting event) serving to influence our decision-making process when using Remembered Utility.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Client Trust & Communication
- General Planning
- Investments
Session Description:
This month we review the September blog articles in two quizzes. This quiz includes the following articles: Making Decisions Based on Happiness, Redefining Advisor Value in Human Process Terms and How To Use Net Unrealized Appreciation (NUA) For Modestly Appreciated Stock To Fund Spending In Early Retirement
Learning Objectives:
LO #1: Explain why surveys that assess consumer happiness are not necessarily optimal tools to help clients identify long-term goals.
LO #2: Contrast how seeking happiness and seeking purpose and meaning are different when it comes to establishing goals.
LO #3: Understand why the process an advisor uses in their practice can be more important to a client than the services offered.
LO #4: Explain what an NUA transaction is and the circumstances when it would benefit the retirement account owner.
LO #5: Describe the conditions under which an NUA transaction is allowed.
Key Terms:
Eudaimonia: A concept used by Aristotle, referring to an individual’s ultimate goal in life, which is to strive for more than just happiness, but to seek meaning, purpose, and fulfillment as a means to flourish.
Hedonism: The philosophical principle of pursuing pleasure as the ‘proper aim’ of human life.
Regression Coefficient: A statistical value that ranges between +1 and -1, gauging the relative relationship between two factors. If the relationship is positive, the values move in the same direction (i.e., if one value goes up or down, the other will do the same); if it is negative the two values move in opposite directions. A value of 0 suggests there is no relationship between the two factors.
401(k) Plan: A retirement account sponsored by an employer, which allows employees to contribute a portion of their salary, invest their funds in a variety of investment options (which may include company stock), and defer ordinary income tax on the contributions they make to the account.
Net Unrealized Appreciation (NUA): Appreciation of the employer’s company stock held in an individual’s retirement plan sponsored by the employer
NUA Triggering Event: One of three conditions that must be met in order for a NUA transaction to take place.
Lump-Sum Distribution: Withdrawal of the entire balance owned by an individual who is a plan participant of their employer’s qualified retirement plan. The distribution must take place within a single tax year, and generally takes place only after the participant leaves the company, reaches age 59 ½, becomes permanently and totally disabled, or dies.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
Pending
Kitces Topic Areas:
- General Planning
- Investments
Session Description:
This month we review the August blog articles in two quizzes. This quiz includes the following articles: Storing Cryptocurrency Securely: The Safest Options For New And Experienced Investors and Limits Of Tax Diversification And The Tax Alpha Of Roth Optimization
Learning Objectives:
LO #1: Identify how cryptocurrency is a unique form of asset.
LO #2: Understand how cryptocurrency keys, wallets, and exchanges are used.
LO #3: Explain how the timing of account contributions is important in ‘Roth optimization’.
LO #4: Understand why splitting contributions between Roth and Traditional IRAs isn’t really a means of achieve ‘tax diversification’
LO #5: Identify the tax thresholds in which Roth optimization strategies are most important to maintain.
Key Terms:
Cryptocurrency Keys: Long strings of letters or numbers that serve as codes that facilitate sending and receiving assets in cryptocurrency transactions.
Cryptocurrency Wallets: A physical device or software program that stores a user’s cryptocurrency keys.
Cryptocurrency Exchanges: A currency exchange that allows users to transact one type of currency for another (e.g., exchanging Bitcoin for U.S. dollars).
Tax Equivalency Principle: The principle that the value of tax-free growth in a Roth account is equivalent to the value of the upfront tax deduction taken for a contribution to a traditional retirement account, assuming that tax rates stay the same over time.
Roth Optimization: Strategically allocating contributions between Roth and Traditioanl retirement accounts by factoring in the timing of one’s own tax circumstances
Marginal Tax Rate: The tax rate that applies only to each additional dollar earned as income.
Effective Tax Rate: The average tax, calculated by dividing total amount of tax by total income.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
Pending
Kitces Topic Areas:
- Client Trust & Communication
- Financial Psychology
- General Planning
- Investments
Session Description:
This month we review the August blog articles in two quizzes. This quiz includes the following articles: Leveraging 529A ABLE Accounts For Disabled Beneficiaries To Gain The Emotional Benefits Of Greater Financial Autonomy and Living A Happier (Financial) Life By Deliberately Choosing “Less”
Learning Objectives:
LO #1: Understand the purpose of and qualification requirements for 529A ABLE Accounts.
LO #2: Identify how some of the emotional challenges faced by individuals with disabilities can be addressed by using 529A plans to meet their financial needs.
LO #3: Understand how SSDI and other benefits should be coordinated with 529A plans.
LO #4: Explain how ‘subtraction’ can be an effective problem-solving approach, and why people tend to add complexity when solving problems instead.
LO #5: Identify ways that subtraction can be used to help clients set meaningful goals.
Key Terms:
ABLE Account: Also known as 529A Plans, these are tax-advantaged accounts designed for individuals with disabilities.
Medicaid: Jointly sponsored Federal and state government program that offers health coverage to a broad range of individuals, including low-income families and persons with disabilities.
Supplemental Security Income (SSI): Benefit program administered by the Social Security Administration that provides minimum financial aid to older adults and persons with disabilities or who are blind, and who have very limited income and resources.
Section 8: A government program that offers subsidies to private landlords, allowing them to rent housing to low-income tenants below fair market rental value.
Social Security Disability Insurance (SSDI): Benefit program administered by the Social Security Administration that provides benefits to disabled or blind persons who have a qualifying work history (either their own, or through a qualifying family member).
Maximizer: Individuals who continually strive for more, and who are rarely satisfied with the idea of ever having ‘just enough’.
Flow: The state of mind when someone is fully engaged in and deeply focused on what they are doing.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
4.1.2021
Kitces Topic Areas:
- Client Trust & Communication
- Financial Psychology
Session Description:
This month we review the March blog articles in three quizzes. This quiz includes the following article: Overcoming Clients’ Behavioral Biases Using Nudges, Smart Heuristics, and Behavioral Coaching and Helping Clients Change: From Pre-Contemplation to Implementation Action.
Learning Objectives:
LO #1: Identify the client behavior or bias and type of intervention (nudge, smart heuristic, or coaching) best suited for that situation.
LO #2: Understand the different ways advisors, firms, and clients may be introduced to these different interventions and discuss them.
LO #3: Understand what clients in the pre-contemplation stage are dealing with at a psychological level.
LO $4: Identify strategies to address each of the issues a client struggles with at the pre-contemplation stage.
LO #5: Understand how to use the worksheets to guide client-advisor conversations in the pre-contemplation stage.
Key Terms:
Nudge: A decision-making aid designed to simplify the process for clients to stick to their financial plan; nudges eliminate the requisite brainwork and lower (if not eliminate) the need for willpower.
Behavioral Bias: An irrational preference based on a person’s failure to take in all available information (or perhaps their failure to consider it altogether) when making a decision. This can result in less-than-optimal choices, or what economists call irrational decision-making.
Pre-Contemplation Stage: Sometimes deemed the ‘denial’ stage of the change process; this stage is when clients are unaware that a problem even exists and have no intention to change.
Contemplation Stage: The stage when clients are aware that they have an issue and know that their behaviors (or lack thereof) have consequences affecting the issue; they typically have developed an intention to make a change.
Preparation Stage: The stage when clients have clearly identified the issue and have placed making change as a high priority. They have started thinking about what it will take to make the change happen.
Action Stage: The stage when clients take the plan that they were putting together in the preparation stage and actually set it in motion.
Smart Heuristic: Also commonly referred to as a ‘rule of thumb’ these are simple guidelines intended to be easy-to-remember rules, like “save 20% of your income”, which can create a baseline knowledge for advisors and clients to begin a deeper and more collaborative discussion.
Behavioral Coaching: This is a form of intervention that focuses on the client’s thoughts and feelings as they pertain to a decision. This method does take time but can help with follow-through and maintenance of a decision to move forward or change behavior.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
4.1.2021
Kitces Topic Areas:
- General Planning
- Investments
- Retirement Planning
- Taxes
Session Description:
This month we review the March blog articles in three quizzes. This quiz includes the following articles: Using Probability-Of-Success-Driven Guardrails to Manage Safe Retirement Spending and Claiming the Home Office Deduction After a Work-From-Home Pandemic Year
Learning Objectives:
LO #1: Identify the drawbacks and benefits of the guardrail system of safe retirement spending.
LO #2: Identify the drawbacks and benefits of the probability-of-success system of safe retirement spending.
LO #3: Understand the strategies to employ the benefits of a mixed-method, probability-of-success-driven-guardrails approach to explaining and examining safe retirement spending.
LO #4: Understand who is eligible to (and who is not eligible to) claim the home office deduction.
LO #5: Identify the two methods, and their drawbacks and benefits, for calculating the home office deduction.
Key Terms:
Guardrails Strategy: A retirement spending approach developed by Guyton and Klinger, this strategy considers upper and lower portfolio limits (i.e., the “guardrails”), that serve as pre-determined thresholds for determining when to increase or decrease future spending.
Exclusive-Use Test: This test must be passed to claim the home office deduction, where the portion of the home that is deemed the home office must be used entirely for business purposes.
Regular-Use Requirement: A requirement that must be met to claim the home office deduction, where the home office must be used on a regular basis. Simply using one’s home office on occasion would be insufficient to claim the deduction.
Principal-Place-of-Business Requirement: A requirement that must be met to claim the home office deduction, where the home office must be the taxpayer’s principal place of business as determined by the amount of time spent at various business locations and the importance of tasks performed at each location.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
2.4.2021
Session Description:
The Monte Carlo analysis is a great financial planning tool, but it is not without its drawbacks. For instance, it is uni-dimensional, focusing only on the probability of success. And certainly, success is good, but the Monte Carlo does not ensure success nor does it tell a client what to do when the plan is no longer successful, which is the larger issue. Join us for this month’s webinar and learn how to adapt the Monte Carlo analysis, making it more useful and tangible for clients. Advisors will learn practical conversation tips and approaches for working with clients and begin to think about the Monte Carlo analysis in a new light.
Learning Objectives:
LO #1: Examine ideal triggers for adjusting client spending.
LO #2: Understand the influence of abstraction and why it matters to Monte Carlo analysis.
LO #3: Examine the dimensions (or lack thereof) of Monte Carlo analysis.
LO #4: Review how and examine how to best present results to clients.
LO #5: Understand how the ‘guardrails’ approach can be applied to Monte Carlo analysis and the tips for relaying that information to clients.
Key Terms:
Monte Carlo Analysis: A method of assessing the probability of certain outcomes and success levels by analyzing a large number of separate trials, generally based on historical market returns.
Perception: Related to our senses, this is what we are aware of what we are perceiving which can and is often guided by mental models.
Abstraction: Related to our perception, how are ideas and concepts (or even events) described, and what is the quality of the dimensions associated with making an abstract idea more concrete.
Functional Abstraction: This is related to the pieces or concepts of what makes an abstract idea more concrete and, in particular, usable for understanding or organizing.
Risk: Risk is a part of all portfolios and an aspect of the Monte Carlo analysis that a client may struggle to understand.
Magnitude: Magnitude, the measure of how large a change would be, is a missing piece of the Monte Carlo analysis, but is certainly a very important point of what the client experiences.
Framing: Whether positive or negative, the framing of an event or an outcome is incredibly powerful in shaping how clients feel about that outcome.
Guardrails Approach: Commonly used in spending and rebalancing decisions, this is a rules-based approach setting thresholds on either side of the intended withdrawal rate and then making adjustments up or down over time to keep within the safe range.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
2.24.2021
Kitces Topic Areas:
- Client Trust & Communication
- Financial Psychology
Session Description:
This month we review the February blog articles in two quizzes. This quiz includes the following articles: (1) Helping Resistant Clients Follow Through On Recommendations Using Reflection, and (2) Nudges, What Works (And Doesn’t) Beyond Automatic Savings
Learning Objectives:
LO#1: Identify the different styles of reflection and how they work with resistance.
LO#2: Understand how a person could use more than one style of reflection to address overconfidence bias, the most commonly encountered cognitive bias.
LO#3: Identify the problem of nudges from an educational perspective.
LO#4: Define nudges and how to apply them to practice while keeping education a priority.
LO#5: Identify the different styles of nudges and important considerations around transparency.
Key Terms:
Behavioral Bias: An irrational preference based on a person’s failure to take in all available information (or perhaps their failure to consider it altogether) when making a decision, which can result in less-than-optimal choices, or what economists call irrational decision-making.
Reflection: In its simplest form, this is simply repeating back to the client (friend, family member, office mate) what you have just heard them say.
Resistance: When a client pushes back on plan suggestions, for either conscious or unconscious reasons, which, if not handled with care, can cause the client to dig in deeper and commit to NOT changing.
Cognitive Bias: This bias is based on information processing, such as, confirmation bias where we seek out more information that confirms our current belief and sometimes purposefully ignore information that does not fit our current beliefs.
Nudge: A decision-making aid designed to simplify the process for clients to stick to their financial plan; nudges eliminate the requisite brainwork and lower (if not eliminate) the need for willpower.
Nudge Transparency: Transparency refers to whether the intention behind the nudge is made clear – if the intention is obvious or known then it is considered to be a transparent nudge.
Nudge Type: Nudges can either be Type 1 (automatic/subconscious) or Type 2 (deliberative/conscious). For advisors, nudge type depends on whether they want the client to think and deeply consider information, or if they do not need or want the client to make an effort to consciously think about a decision (e.g., sending a monthly check to transfer funds from a checking account to a savings account, when the process could easily be automated to free up brain space for other issues or behaviors).
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
2.1.2021
Kitces Topic Areas:
- Client Trust & Communication
- Financial Psychology
Session Description:
This month we review the January blog articles across two quizzes. This quiz includes the following articles: (1) When More Advisor Empathy Isn’t Better And The Compassion-Based Alternative and (2) Dave Ramsey’s Behavioral Advice Ingenuity To Help People Make Better Financial Decisions
Learning Objectives:
LO #1: Examine the differences between emotional and cognitive empathy.
LO #2: Examine the drawbacks of emotional empathy such as burnout.
LO #3: Understand how compassion beats empathy.
LO #4: Understand some of the benefits of Dave Ramsey’s programs by examining them through a behavioral lens.
LO #5: Understand how Dave Ramsey’s behavioral approach can benefit financial planning clients.
Key Terms:
Emotional Empathy: Actually feeling the same emotions that others feel because of something only the other person is affected by.
Cognitive Empathy: Recognizing what others feel, but not actually experiencing it for yourself.
System 1: From the book and research by Dr. Daniel Kahneman, System 1 is the fast, instinctive and emotional part of our brain.
System 2: From the book and research by Dr. Daniel Kahneman, System 2 is the slower, more deliberative and logical part of our brain.
Snowball Methodology: The methodology is about momentum. Essentially, completing small goals builds momentum toward the ability to complete larger or harder goals in the future.
Compound Interest: This is essentially interest on interest. It is the outcome of savings and reinvesting, where interest is earned on the principal sum and any previously accumulated interest.
Financial Peace University: A Dave Ramsey program designed to bring people together to learn about finances and work toward financial goals individually, but also as a group.
Level of Complexity:
- CFP / IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 2.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
N/A
Kitces Topic Areas:
- Ethics
- Planning Profession
- Practice Management
- Regulation & Compliance
Session Description:
This month we review the June 2020 blog posts, which fulfill the requirement for CFP Board approved Ethics CE. The blogs and quiz have been designed to educate CFP® professionals on CFP Board’s new Code of Ethics and Standards of Conduct effective October 1, 2019.
Learning Objectives:
At the end of the course, participants will be equipped to: Identify the structure and content of the revised Code and Standards, including significant changes and how the changes affect CFP® professionals; Act in accordance with CFP Board’s fiduciary duty; Apply the Practice Standards when providing Financial Planning; Understand the Duty to Report to CFP Board and the Duty to Cooperate.; Recognize and avoid, or fully disclose and manage, Material Conflicts of Interest.
Level of Complexity:
- CFP: Basic Ethics
Specialized Knowledge:
- CFP: Ethics
Recommended CE Hours:
- 2.0 CFP Hours
- 2.0 IAR E&PR Hours
- 2.0 IWI General Financial Planning hours
- 2.0 IWI Ethics hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Webinars
Kitces Topic Areas:
- Retirement Planning
Kitces Topic Areas:
- Retirement Planning
Program Description:
CE credit applied for. There will be a delay in reporting completions.
The appeal of a Roth-style retirement account is the potential for tax-free growth for life. However, the reality is that creating a Roth account has a ‘cost’ – the upfront tax liability of contributing to (or converting into) the account, which is avoided with a traditional pre-tax IRA or 401(k). As a result, optimal Roth strategies do not merely involve contributing to or converting into Roths, but managing the timing and leveraging the available tax law to maximize the strategy.
Join Chief Financial Planning Nerd Michael Kitces at the September Kitces Monthly Webinar, where he’ll share techniques to maximize Roth contributions, including “Backdoor Roth” IRAs and “Mega Backdoor Roth” 401(k) strategies, leveraging the Roth recharacterization rules to optimally fill lower tax brackets, and being able to ensure that an investment in a Roth has a positive return before being required to commit to it!
Learning Objectives:
At this Kitces Monthly Webinar, advisors will learn:
- How to 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
- The mechanics of the “Backdoor” Roth IRA strategy and considerations for using it
- The rules for successfully implementing a Mega “Backdoor” Roth IRA Strategy
- How to create additional tax planning flexibility using partial Roth conversion
Specialized Knowledge:
- CFP: Retirement Savings and Income Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Retirement Planning
Program Description:
Monte Carlo simulations have become the dominant method for conducting financial planning analyses for clients. They are a feature of most comprehensive financial planning software programs, and advisors often use this data point as the centerpiece when they present a financial plan. However, a Monte Carlo simulation ultimately captures an outrageous spectrum of outcomes, then puts a probability of success number on a client’s plan which is supposed to help them make sense of that outrageous spectrum, but doesn’t necessarily leave them with a true peace of mind. Further, most advisors don’t really understand how to best interpret a Monte Carlo simulation, let alone communicate the analysis to clients in a way that creates the peace of mind they’re looking for. As an alternate strategy, advisors use guardrails, which are guidelines to increase or decrease spending when portfolio withdrawal rates reach certain levels. Yet, most retirees do not spend at the constant distribution rates assumed . So what is available to the advisor who wants to provide an effective retirement analysis to clients that reflects how dynamic retired life can be?
At this Kitces Monthly Webinar, Derek Tharp, Lead Researcher at Kitces.com, discusses risk-based guardrails as a way to better guide flexible income planning for retirees, and the levers that can be adjusted in setting proper (risk-based) guardrails for retirement income.
Learning Objectives:
– LO #1: Define the risk-based guardrail approach and its advantages.
-LO #2: Examine how guardrail strategies perform in the real world.
– LO #3: Understand which levers really matter in a risk-based guardrails plan.
– LO #4: Examine the impact of different risk-based guardrail parameters.
– LO #5: Identify practical considerations of using risk-based guardrail parameters.
Specialized Knowledge:
- CFP: Retirement Savings and Income Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Taxes
Program Description:
Over the past few decades, higher education costs have increased at a pace far exceeding inflation. In an effort to help save for such costs, many families have turned to 529 plans. While the basic mechanics of such plans are well understood by most advisors, 529 planning can become surprisingly complex, especially when planning for multiple (generations of) potential students, or when 529 plan funds are used for purposes other than higher education. Join Lead Financial Planning Nerd, Jeff Levine, at the July Kitces Monthly webinar, where you’ll explore many of these complexities and take a deep dive into some of the more challenging aspects of 529 planning.
Learning Objectives:
- An overview of key 529 plan rules
- Tax consequences of changing 529 plan owners and/or beneficiaries
- The impact of ownership decisions on student aid
- Trust-owned 529 plans considerations and the “Dynasty 529 Plan”
- State tax complications created by recent changes to the Federal tax rules
- SECURE 2.0’s 529-to-Roth IRA transfers and the “Sweet 16 Roth IRA”
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Taxes
Program Description:
IAR CE applied for, but reporting may be delayed.
With the end of an extended period of relatively low mortgage rates, today’s homebuyers are facing a challenging combination of higher financing costs and continued elevated home prices, which together can make purchasing a home an expensive proposition. This creates a dilemma for clients looking to buy a home – should they buy now or wait in the hope that home prices and/or rates will drop in the near future? And clients who are current homeowners are not immune to these dynamics as well, as changes in home prices can affect the value of what is often their largest single asset and elevated mortgage rates could make a future move less attractive. With these factors in mind, advisors can add value to their clients by helping them understand the drivers of home prices and mortgage rates as well as by offering strategies that can help them make the most of their home buying and selling decisions.
Learning Objectives:
LO1: Review the current home price and interest rate environments
LO2: Understand how home prices and interest rates tend to act during recessions
LO3: Describe recent trends in residential housing markets
LO4: Describe and review demographics of home purchases as well as current and projected inventory levels
LO5: Identify mortgage planning strategies to use in elevated interest rate environments
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Taxes
Program Description:
The transition from employer insurance to Medicare is fraught with confusion. Clients turning 65 or leaving employment must leave the safety and simplicity of their pre-selected and subsidized employer plan to the wild world of Medicare, with all its parts, multiple enrollment periods, and private insurance options to fill the coverage gaps. This session will cover health insurance in retirement: how Medicare works, how to choose private insurance to go with Medicare, and how to establish a health care budget.
Learning Objectives:
LO1: Review Medicare coverage options and enrollment deadlines
LO2: Describe how advisors can help working clients coordinate their work-provided health insurance coverage with Medicare coverage once they reach age 65
LO3: Describe how enrollment in Medicare affects how a client can use their Health Savings Accounts
LO4: Understand the differences between and potential pros/cons of Medigap and Medicare Advantage coverage
LO5: Identify how to estimate total client health care costs in retirement
Specialized Knowledge:
- CFP: Insurance
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- Taxes
Program Description:
S Corporations, and their taxation, are of interest for financial planners as much as they are for financial planning clients. For instance, what is “reasonable compensation”? Or how is the health insurance premium handled? – These are questions financial planners have to answer for clients as well as sometimes for themselves. This month’s webinar will arm financial advisors with the benefits, limitations, and strategies for S-Corps that they can share with clients and use for themselves.
Learning Objectives:
- LO #1: Review basic S Corp rules and definitions, such as the taxation of S Corp profits.
- LO #2: Review recent tax law changes as they relate to S Corps.
- LO #3: Identify the benefits of S Corps, such as liability protection and the transferability of ownership interests.
- LO #4: Identify the limitations of S Corps, such as the number of allowed shareholders.
- LO #5: Identify strategies S Corp owners can consider to reduce their tax liability.
Specialized Knowledge:
- CFP: Taxation
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
Program Description:
Helping clients to figure out how to spend their money in retirement is a large part of advisor’s work and no easy task. Clients can get confused about strategies. And strategies themselves become more and more complex given the complexity of the client (is the client a couple, high-income, business owner, have inheritance or giving goals). Yet, one unifying principle is that advisors and clients both want as much income in their hands as possible and this brings taxes and tax efficiencies front and center. Join us and learn not only about efficient strategies, but rules of thumb that can be taken back to practice and ease client-advisor conversations about planning and spending complexities in and through retirement.
Learning Objectives:
- LO #1: Understand the taxation of different accounts and investments.
- LO #2: Examine the impact of changing marginal tax rates.
- LO #3: Review the planning considerations and outcomes of different types of accounts and investments.
- LO #4: Review net return rules for exempt and deferred tax accounts.
- LO #5: Outline the retirement withdrawal implications and rule of thumb for spending in retirement.
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Key Terms:
Gross Return: Total return before accounting for fees, taxes, commissions, or expenses.
Net Returns: The amount of return after fees, tax, commissions or expenses are deducted. What the client would actually receive at the end of the day for spending/use.
Goal-Based Investing: Building an investing strategy that funds a spending goal with highest net return for a given level of risk.
Marginal tax rate: This is the tax rate paid on the last dollar of taxable income. Or sometimes defined as the amount of additional tax paid for every additional dollar earned as income.
Net Investment Income Tax: This is an imposed tax, an additional 3.8%, on certain net investment income of individuals, estates, and trusts that have income above the statutory threshold amounts.
Asset location: A strategy for minimizing taxation by placing certain types of investments in different types of accounts (e.g., taxable, tax free, or tax deferred).
Tax Bracket Management: A strategy of realizing income to fill up tax bracket ‘buckets’ to avoid paying a higher tax rate in the future.
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
Program Description:
Ongoing monitoring meetings get boring. Advisors and clients alike are not thrilled to be having the same meeting again and again where there is nothing new or exciting to report. Yet, when clients hit the “fine” phase of the client-advisor relationship, this can be the perfect time to start having “flourish” conversations and bring some fun back to the client-advisor relationship and transform the boring monitoring meetings. Join us and learn about thinking of the three phases of the client advisor relationship as fix, fine, flourish and the questions to ask clients that move them from fine to flourish which ends up brining the advisors back to where they are happiest, at fix.
Learning Objectives:
- LO #1: Examine on-going monitoring meetings and what makes them boring and how to know when clients are bored too.
- LO #2: Understand the fix, fine, flourish cycle to client advisor relationships.
- LO #3: Define flourish and identify the flourish components.
- LO #4: Review questions and meeting process for having flourish conversations.
- LO #5: Identify how to start having flourish-based meetings.
Level of Complexity:
- CFP: Financial Planning Process
- NASBA: Specialized Knowledge (Personal Financial Planning
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Key Terms:
Fix: The early phase of the client-advisor relationship where there are clear financial issues or goals that need to be addressed. Transitions can also reignite fix.
Fine: The middle phase of the client-advisor relationship where clients and advisors alike mainly describe their interaction as fine. These are useful times for rest, but they can also get boring and end out with unsatisfying meetings.
Flourish: A third phase of the client advisor relationship where new goals related to growth and self-worth, and purpose, meaning, autonomy and relationships are explored with greater depth that would not have been possible before, earlier in a fix or fine phase.
Maslow’s Hierarchy Of Needs: Developed by Abraham Maslow, Maslow’s hierarchy of needs was meant to explain motivation and provide insight into the human condition to meet both basic physical and emotional needs as well as complex physical and emotional needs. Human needs are broken into 5 categories: physiological needs, safety and security, love and belonging, self-esteem, and self-actualization.
End Of History Illusion: The psychological phenomena describing how a person will describe their current self compared to their younger self as totally different and yet asked to describe the future self, persons will default to saying future self is much like the current self. In a sense, they describe an end of history as though they will stop changing.
Arrival Fallacy: The psychological phenomena describing how people often enjoy the pursuit of a goal more than they enjoy actually achieving the goal. Humans tend to be happier striving toward success than they do achieving success.
Positive Psychology: A movement spawned by Dr. Martin Seligman that focuses on studying individuals that are doing well, have strengths, and want to have more full lives in contrast to focusing on the study of disorders and maladaptive behavior.
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
Program Description:
Jeff Levine, CPA/PFS, CFP® and Director of Advisor Education at Kitces.com, will give an in-depth breakdown of the SECURE 2.0 Act that has been passed by both houses of Congress and is expected to be signed into law before the end of 2022. In this breaking-news webinar, Jeff will go over the numerous provisions of SECURE 2.0 that will be relevant for advisors and their clients, including the legislation’s gradual pushing back of the RMD age from 73 to 75, the expansion of opportunities to make Roth contributions (including new SEP and SIMPLE Roth IRAs), and the elimination of RMDs on Roth-style employer retirement accounts; along with the ability to transfer 529 plan assets to a Roth IRA, expanded catch-up contribution limits, new exceptions to early-withdrawal penalties, and more. Advisors will walk away with information on how their clients will potentially be affected by the new law, as well as ideas on how to take advantage of some of the new planning opportunities it opens up.
Learning Objectives:
– LO #1: Identify when individuals will be required to begin RMDs under the new law
– LO #2: Explain how SECURE 2.0 affects Roth savings in employer-sponsored retirement plans
– LO #3: Describe the new catch-up contribution rules for employer retirement plans and IRAs
– LO #4: State the new methods that employees can use to take advantage of employer matching contributions under SECURE 2.0
– LO #5: Describe the new rules that apply to transferring 529 assets to Roth IRAs.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Taxation
- NASBA: Specialized Knowledge (Personal Financial Planning)
Key Terms:
529 Account: A state-agency-sponsored tax-advantaged account established for education savings intended to be used for college expenses (tuition, books, and other qualified expenses), K-12 tuition, certain apprenticeship costs, and some student loan repayments.
529A Account (aka ABLE Account): Also known as an ABLE account, created in 2014 as part of the “Achieving a Better Life Experience” (ABLE) Act. This account allows families to save and invest funds for the care of a disabled family member while maintaining eligibility for public benefits such as Social Security, Medicaid, and public housing.
Age 50 Public Safety Worker Exception: Exception to the 10% early withdrawal penalty for certain public safety workers (e.g., firefighters, corrections officers, forensic security employees, et al.) who separate from service in the year they turn 50 or older.
Long-Term Care Insurance: insurance policy that is designed to help with the cost of long-term care services.
Multiple Employer Plans (MEPs): These are single retirement plans that are maintained for the benefit of two or more unrelated employers.
One Bad Apple Rule: A rule imposed by the IRS that results in the disqualification of an entire MEP if an impermissible action – or the failure to take a required action – is carried out by a single employer participating in the MEP. In other words, if just one employer in the MEP (of many participating employers) didn’t properly complete all the required steps of 401(k) plan administration, the entire plan – for all participating employers – would be disqualified.
Qualified Charitable Contribution: An above-the-line charitable contribution established by the CARES Act to support charitable giving.
Qualified Longevity Annuity Contract (QLAC): A deferred annuity, in contrast to an immediate annuity, funded with an IRA or a qualified retirement plan.
Qualifying First Responders: Law enforcement officers, firefighters, paramedics, and Emergency Medical Technicians (EMTs) who receive service-connected disability and retirement pensions.
Required Minimum Distribution (RMD): The amount that one must withdraw each year from qualified retirement accounts (e.g., Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, etc.) once the owner has reached age 70½.
Roth Account: An account in which after-tax distributions are made and future withdrawals (including interest) are tax-free when made after age 59 1/2.
Saver’s Credit: A tax credit for eligible taxpayers who make certain contributions to retirement plans (e.g., Traditional and Roth IRAs, 401(k), 403(b) government 457(b), SARSEP, and SIMPLE plans). Amount of the credit is a percentage of the contribution (up to $2,000 for individuals and $4,000 for MFJ), depending on AGI.
Setting Every Community Up For Retirement Enhancement (SECURE) Act: Signed into law by President Donald Trump on December 20, 2019, this piece of legislation will have the largest direct impact on retirement accounts since the passage of the Pension Protection Act in 2006.
SECURE Act 2.0: Part of the Consolidated Appropriations Act of 2023 signed into law by President Joe Biden on December 23, 2022, SECURE Act 2.0 made sweeping changes to various retirement savings rules, including (but not limited to) pushing back RMDs to age 73 in 2023 (with a provision to push them back again to age 75 in 2033), elimination of RMDs from Roth accounts in employer retirement plans, allowing transfers from 529 accounts to Roth IRAs.
Solo 401(k) Plan: Retirement plan similar to a traditional 401(k) plan but restricted to self-employed business owners with no employees other than themselves (with the exception of the business owner’s spouse as the only other employee). The business owner may make contributions as an employee (with an annual limit of the smaller of 100% of compensation or up to $20,500 in 2022), and as an employer (up to 25% of their compensation).
Variable Annuity: Contract between an insured and insurance company that establishes a tax-deferred investment account with insurance features that can provide a stream of income through periodic payments and a death benefit for a designated beneficiary
Variable Universal Life Insurance: Permanent life insurance policy that offers savings and investment components and flexible premium. The cash component can be invested through investment subaccounts.
Course Review Date:
N/A
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Taxes
Session Description:
Jeff Levine, CPA/PFS, CFP® and Director of Advisor Education at Kitces.com, will be walk advisors through regular year-end planning discussions advisors will likely be having with clients as well as ‘abnormal’ discussions based on the tax, inflation, and market environment experienced in 2022. Such topics include addressing risk for near- and current retirees in the current market environment as well as changes to RMD and FSA rules. In addition, the webinar will discuss Roth conversions, Tax-Loss Harvesting, and other strategies and questions to cover with clients in order to help them think about the present as well as the future. Financial planners will walk away with greater awareness of potential changes and strategies to close out 2022 and start 2023.
Learning Objectives:
– LO #1: Identify near/recent retiree conversations around sequence of return risk and how to talk to clients in those situations about tradeoffs.
– LO #2: Review Coronavirus-related legislation and their expiration dates such as coronavirus-related distributions, RMD rules, and FSA rules and how to plan moving into the future.
– LO #3: Review strategies and considerations for Roth conversions, year-end contributions, as well as both tax loss and tax gain harvesting.
– LO #4: Reviewing tax withholding considerations and how to have conversations about future tax rates
– LO #5: Review Medicare open enrollment and revisit home office deductions.
– LO #6: Identify other conversations, such as State And Local Tax (SALT) planning and beneficiary reviews, that can also bring value to end of year planning and reviews.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Taxation
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
FSA: Flexible Spending Accounts allow users to make pre-tax contributions to pay for certain out-of-pocket health care costs
Wash-sale: Occurs when an investor sells an investment at a loss and buys a substantially similar security within 30 days before through 30 days after the sale
Tax-Loss Harvesting: Selling an investment at a loss to capture a tax deduction while re-investing the proceeds to maintain market exposure
Capital Gains Harvesting: For those in the bottom two tax brackets, capital gains can be realized at a 0% tax rate
Section 179 Expensing: An immediate expense deduction for business owners for purchases of depreciable business equipment
Coronavirus Related Distribution: A coronavirus-related distribution is a distribution that is made from an eligible retirement plan to a qualified individual from January of 1, 2020 to December 20, 2020, up to an aggregate limit of $100,000 from all plans and IRAs
SALT: State And Local Tax deductions were capped at $10,000 under the Tax Cuts and Jobs Act
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
Session Description:
SLATs (Spousal Lifetime Access Trusts) are a popular estate planning tool for married clients with a net worth above the current estate planning exemption. Yet, SLATs can also be adapted for clients with $1-10 million in net worth solving for uncertainty, tax, asset protection, and aging. In this webinar advisors will review what a SLAT is and then go through tangible examples of how to turn this traditionally ultra-high net worth tool into a useful tool for a wider range of clients.
Learning Objectives:
- Define a SLAT (Spousal Lifetime Access Trust) and its common uses.
- Identify the benefits of a SLAT for ultra-high net worth couples.
- Identify the benefits of the SLAT for families with $1-10M in net worth.
- Identify the considerations for how to make a SLAT appropriate for $1-10M clients.
- Identify how insurance and beneficiaries must also be considered to make the SLAT appropriate for $1-10M clients.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Estate Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
SLAT (Spousal Lifetime Access Trust): A set of irrevocable trusts made between partners, where the other partner is the beneficiary to the other partner’s trust and vice versa.
DAPT (Domestic Asset Protection Trust): A trust in which the settlor is also named as a beneficiary.
Hybrid DAPT: A traditional irrevocable trust combined with a Domestic Asset Protection Trust (DAPT).
SPAT (Special Power of Appointment Trust): A trust that gives someone, in a non-fiduciary capacity, a collateral power of appointment, allowing distribution of trust property to anyone in a class that includes the grantor (e.g., descendants of the grantor’s grandparents).
ILIT (Irrevocable Life Insurance Trust): An irrevocable trust that, when used properly, keeps a life insurance death benefit out of the grantor’s estate.
Step Transaction: The legal principle that a series of related steps in a transaction should be taxed based on the overall economic nature of the transaction, not just based on the separate individual steps.
Reciprocal Trust Doctrine: Essentially states that if Person A creates a trust for B, and B creates an identical (i.e., reciprocal) trust for A, that the courts can “uncross” the trusts and treat the situation as though each person created a trust for his/her own benefit.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
Session Description:
ETFs have become essential components of many investors’ portfolios in recent years. Their low costs, tax efficiency, and ability to provide exposure to numerous asset classes have made them a popular choice within tax-advantaged and taxable investment accounts alike. But as the number of dollars flowing into ETFs has grown, so too has the diversity and complexity of ETF products on the market – from actively-managed and leveraged products to ESG offerings to (likely in the near future) cryptocurrency funds. And so, with ETFs making up the core building blocks of many advisors’ portfolio management strategies, it is critical for advisors to understand not only the role ETFs play today, but also how they could continue to evolve and help shape the relationship between portfolio management and financial advice in the years to come.
This webinar will discuss current trends within the ETF industry (including considerations such as growth versus value, inflation, and flows into ESG or values-based ETFs), as well as areas of future research such as the role of indexing, the risks posed by shifting regulatory environments, and innovations in fixed income ETFs.
Learning Objectives:
- Describe the ETF creation and redemption process.
- Identify the due diligence steps for advisors to select ETFs
- Review new developments in ESG investing (and other types of investing that use environmental and social criteria)
- Identify gaps in FinTech that impact the financial advice industry
- Review potential upcoming client discussions around passive investing impacts and regulation for complex products.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Investments
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Exchange-Traded Fund (ETF): A type of investment company that invests in a basket of underlying securities, and whose shares are traded in real time on market exchanges
Authorized Participant: The only type of market participant who is directly involved in the creation and redemption of ETF shares; typically a market maker who exchanges the ETF’s underlying securities for shares of the ETF (and vice-versa)
Environmental, Social, Governance (ESG): A broadly-defined investment framework that focuses on the environmental, social, and governance characteristics of portfolio companies.
Socially-Responsible Investing (SRI): An investment framework that focuses on the alignment of the portfolio companies with the investor’s values.
Impact Investing: An investment framework focused on having a positive effect on society via the investor’s portfolio companies
Target Date Funds: A type of investment fund comprised of multiple asset classes that automatically re-balances to a target allocation based on the time horizon until a specific date (typically defined as the target retirement date of investors in the fund).
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
Program Description:
A unique element of financial planning is that client relationships can last for a very long time, with many advisors assisting clients over the course of decades as their financial planning needs evolve in step with their personal lives. Due to this aspect of the planning relationship, it is almost inevitable that an advisor will encounter a time when a client is diagnosed with a terminal illness. And while it is important for the advisor to review technical areas of the financial plan (from cash flow to estate planning) with these clients, an even more critical consideration is how to best communicate and interact with a client whose thoughts are consumed by their illness. If the advisor isn’t aware of the strategies for working with a client with a “sick brain”, all the best financial plans will be useless.
Learning Objectives:
- Identify key questions and phrases to use when you communicate with a client who tells you they have a serious illness.
- Summarize common issues for clients that come up when they are moving through the planning process when they don’t feel well
- Identify end-of-life financial concerns around cash flow and insurance.
- Identify end-of-life financial concerns around estate planning, tax planning, and investment planning.
- Compare and contrast case study examples and hear how different end-of-life financial planning can be addressed.
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Health Insurance
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
Ethical Will: A document that passes on values, family stories, and goals from one generation to the next.
Healthcare Directive: Legal document that provides information and direction pertaining to future medical care.
Step-Up in Basis: This is what can happen to an inherited asset at the death of the decedent, when low basis stock or other assets are “stepped-up” to current market values, which can result in large capital gains tax savings.
Beneficiary: The person who receives gifts or assets via a will or other legal documentation.
Hospice: A type of care that focuses on keeping an individual comfortable emotionally, physically, and spiritually as they transition from life to death.
Palliative care: This type of care, like hospice care, is about reducing symptoms and increasing quality of life, but palliative care can begin much sooner than hospice care and support an individual’s quality of life and even extend healthy life.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Kitces Topic Areas:
- General Planning
- Retirement Planning
Session Description:
Sometimes there are situations where individuals need access to funds in their tax-deferred retirement accounts sooner than the rules allow. In fact, except for a narrow range of ‘emergency’ situations, the only way most individuals can access these funds without incurring a 10% early withdrawal penalty tax is by setting up “Substantially Equal Periodic Payments (SEPP)”, otherwise known as 72(t) payments. To do so, however, taxpayers must adhere to several rules that have been provided by the IRS or risk paying significant penalties. Join us at the August Kitces Monthly webinar where expert guest, Jeffrey Levine, will discuss the rules to consider and strategies to apply when helping clients who may need early access to their retirement funds.
Learning Objectives:
- Identify which critical 72(t) payment rules must be considered to avoid penalties
- Identify how to navigate IRS Notice 2022-6, which sets a new 5% ‘floor’ interest rate for calculating 72(t) payments
- Understand the special planning considerations that come up in situations of divorce or multiple accounts
- Understand the special planning considerations that come up with layering exceptions, reporting, and Roth conversions.
- Learn how to apply 72(t) strategies to a variety of client goals
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Taxation
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New and emerging issues or products for the IAR to navigate
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 1.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Key Terms:
72(t) Early Distribution Payments: Distributions from retirement accounts taken before the account owner reaches age 59 ½ but are exempt from the normal 10% early distribution penalty.
RMD Method: A method for calculating 72(t) payments by which the taxpayer’s current account balance is divided each year by an appropriate life expectancy factor.
Annuitization Method: A method for calculating 72(t) payments by which the account balance is divided by an annuity factor that is the present value of an annuity of $1 per year beginning at the employee’s age and continuing for the life of the employee (or the joint lives of the employee and designated beneficiary).
Amortization Method: A method for calculating 72(t) payments by which payments are determined by amortizing the individual’s account balance over a number of years (based on life expectancy determined from one of the approved tables) and using an appropriate interest rate.
Section 7520 Rate: This is the mid-term AFR Rate. It is used in estate planning, it is also what is considered to be the “reasonable” rate for 72(t) distributions.
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
Monte Carlo analysis has become the dominant methodology for advisors to analyze retirement income planning strategies. But the way the results of Monte Carlo analysis are framed for clients can invoke different emotional responses and can affect portfolio withdrawal rate decisions. With this in mind, advisors can take advantage of a range of options to improve their use of Monte Carlo analysis, including framing the results as a “Probability of Adjustment” rather than “Probability of Success”, comparing results using historical scenarios, leveraging regime-based models, and using risk-based guardrails. Using these methods, advisors can potentially provide clients with greater peace of mind regarding their retirement income choices and better help them achieve their specific income and legacy goals.
Course Review Date:
6/21/2022
Learning Objectives:
LO #1: Understand what makes Monte Carlo more reliable than straight-line analysis when portfolio withdrawals are being taken
LO #2: Identify why framing Monte Carlo results as a “Probability of Adjustment” rather than “Probability of Success” can leave clients more confident during a market downturn
LO #3: Identify how Monte Carlo simulations can be improved by using a regime-based approach and by comparing the results to historical returns
LO #4: Understand how risk-based guardrails combine the advantages of standard guardrails and Monte Carlo analysis and can be used to account for client-specific cash flows and risk preferences
LO #5: Identify best practices for communicating results and information to clients for better informed decisions about risk and portfolio adjustments
Level of Complexity:
- CFP/IWI: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: Risk, Retirement Savings, & Income Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASSA: New and emerging issues and/or products for the IAR to navigate
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 0.0 IWI Taxes and Regulations hours
- 0.0 IWI Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
Interest rates are rising and many financial advisory clients are curious as to what this might mean for their financial planning and wealth transfer goals. In some cases, rising interest rates could mean initiating an estate planning strategy as soon as possible, while it might be best to wait to implement others. In this webinar, advisors will learn about the different interest rates that affect gifting and estate planning strategies, which strategies benefit from lower interest rates, and which are more beneficial when rates are high. In addition, advisors will learn how to align the client’s goals with the strategy that helps them achieve that end. Interest rates are rising, but from an estate planning perspective this might mean new opportunities for advisors and their clients!
Course Review Date:
05/25/2022
Learning Objectives:
-LO#1: Understand the origin and relationship between Applicable Federal Rates and 7520 rates.
-LO#2: Identify which estate planning strategies utilize the AFR and which utilize the 7520 rate.
-LO#3: Identify estate planning tactics that benefit from a lower AFR or 7520 rate.
-LO#4: Identify estate planning tactics that benefit from a higher AFR or 7520 rate.
-LO#5: Understand the difference between annuity and unitrust interests.
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Estate Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASSA: New and emerging issues and/or products for the IAR to navigate
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
Funding the costs of higher education is a financial planning topic area that clients frequently seek out advisors to assist with, especially as costs continue to rise. The four-year sticker price of college now exceeds $300,000 at some of the country’s most prestigious institutions. As a result, outstanding student loan debt exceeds $1.7 trillion. Training on financial aid and late-stage college planning is a small component of most advisor education programs, leaving many advisors with questions on how they can best assist their clients with the important decisions around higher education costs. Join us at the May Kitces Monthly Webinar where expert guest, Joe Messinger CFP, ChFC, CLU, CC, will share ideas on how you can better guide families through the college funding maze and make more informed buying decisions.
Course Review Date:
3/31/2022
Learning Objectives:
-LO #1: Review the state of college tuition and college funding outcomes.
-LO #2: How to project a family’s financial aid and out of pocket cost at individual institutions
-LO #3: How to create a college funding plan and ensure students graduate with manageable debt without robbing retirement
-LO #4: What the key differences are in the federal and institutional formulas used to determine a family’s expected family contribution (EFC) need based financial aid eligibility
-LO #5: Which cash flow and tax planning strategies to deploy when funding college expenses
Level of Complexity:
- CFP/IMCA: Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
When the SECURE Act was signed into law in December 2019, it ushered in some of the most significant changes to the rules for retirement accounts in well over a decade. At the same time, however, the statutory language included a number of provisions that were either ill-defined or left open to substantial IRS interpretation. To fill this gap, the IRS issued Proposed Regulations on February 23, 2022, to reflect the changes to the Internal Revenue Code made by the SECURE Act. And while the Proposed Regulations are likely to be amended at least somewhat before they are finalized, they do provide the best window into the IRS’s current thinking on a variety of issues. Join tax expert, Jeffrey Levine, at the April Kitces monthly webinar where he will review the Proposed Regulations and provide clarity around how taxpayers (and their advisors) can start preparing themselves now for how their individual situations might be affected.
Course Review Date:
03/14/2022
Learning Objectives:
LO #1: Identify who falls into post-SECURE Act beneficiary groups: non-designated, designated-eligible, designated-non-eligible.
LO #2: Identify which Non-Eligible Designated Beneficiaries would be subject to both annual RMDs and the 10-Year Rule under the Proposed Regulations
LO #3: Identify the treatment of minor children as both eligible beneficiaries until age of majority (21) and their flip to non-eligible beneficiary.
LO #4: Identify treatment of trusts as beneficiaries under the SECURE Act
LO #5: Identify rules for successor beneficiaries under the SECURE Act
LO #6: Review potential future changes under future SECURE Act regulation.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning / Tax
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CPE:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 1.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
While retirement-income guardrails offer a convenient and easy-to-understand framework for advisors to explain when a client would need to make portfolio adjustments to facilitate spending during retirement, certain guardrail models come with major limitations. For example, withdrawal-rate guardrails are a commonly used framework, but they do not always accurately reflect a client’s dynamic income sources and actual spending behaviors. Risk-based retirement-income guardrails, on the other hand, have the benefits of communication and clarity, while modeling a client’s retirement income sources and spending patterns more realistically. Please join Derek Tharp, Ph.D., CFP(R), CLU(R), RICP(R) and lead researcher at Kitces.com to learn more about risk-based guardrails and the impacts of the varying associated parameters using several examples and practical considerations for implementation.
Course Review Date:
TBD
Learning Objectives:
LO #1: Define the retirement-income guardrail approach and its advantages.
LO #2: Examine the major limitations of withdrawal-rate guardrails.
LO #3: Understand how risk-based retirement-income guardrails overcome limitations of withdrawal-rate guardrails.
LO #4: Examine the impact of different risk-based guardrail parameters.
LO #5: Identify practical considerations of using risk-based guardrail parameters.
Key Terms:
Guardrails Strategy: A retirement spending approach developed by Guyton and Klinger, this strategy considers upper and lower portfolio limits (i.e., the “guardrails”), that serve as pre-determined thresholds for determining when to increase or decrease future spending.
Retirement Distribution Hatchet: This refers to the dynamic spending profile observed in retirement attributed to a client’s various income sources and spending behavior.
Initial withdrawal rate: The withdrawal rate made from a client’s portfolio at the very beginning of retirement.
Upper / lower guardrail: The upper and lower guardrail limits when adjustments in spending need to be made.
Speed of adjustment: The level of adjustment relative to the initial target that should be made over a given period of time, given the client’s unique guardrail parameters.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0 IMCA Taxes and Regulations hours
- 0 IMCA Ethics hours
- 0 IAR EPR Hours
- 1 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
An increasing volume of research is making clear what financial planners have long known – that clients do not always act in a purely rational manner. But it’s one thing to recognize that clients sometimes make irrational decisions, and another to really understand what drives those decisions and how to help clients avoid the most damaging mistakes. In this session, advisors will learn what the behavioral finance research has shown about our not-always-rational decision-making process, and how to consider making adjustments to the delivery of their financial planning services to help clients achieve more desirable outcomes through better communication and enhanced trust.
Course Review Date:
01/19/2022
Learning Objectives:
LO #1: Understand the process of how the brain makes decisions and the limitations of rational thinking on decision making.
LO #2: Be able to apply behavioral finance concepts to how clients are engaged and communicated to as part of the financial planning process.
LO #3: Illustrate how to reshape planning recommendations so that they are better communicated to clients in order to better facilitate client implementation.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
The business of financial advice is an interpersonal one. And how and what to do when clients struggle to consistently take action is part of that work. Yet, doing that is not always so straightforward. Clients and advisors want to co-create implementation plans for higher rates of follow-through and fulfillment. Join the webinar and learn what to do to start using a co-creation environment for clients and yourself and gain traction on financial plan implementation.
Course Review Date:
02/10/2022
Learning Objectives:
LO #1: Understanding how co-creation changes the advice-giving relationship into an implementation relationship.
LO #2: Be able to identify the different parts of the FACTS framework and how reviewing each area can help explain behavior and know what to do about clients that are stuck.
LO #3: Identify common financial advice issues and how to learn to overcome them.
LO #4: Learn the reasons behind why clients struggle to implement and follow-through on plans.
LO #5: Understand what to ask to help gain insight into what clients need in an implementation relationship.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
- NASAA: New & emerging issues and/or products for the IAR to navigate.
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IMCA General Financial Planning hours
- 0.0 IMCA Taxes and Regulations hours
- 0.0 IMCA Ethics hours
- 0.0 IAR EPR Hours
- 1.0 IAR PP Hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Session Description:
The Exchange-Traded Fund (ETF) was first created over 30 years ago, but over the past decade their popularity has soared, and (ETFs) have become an increasingly popular building block in advisor portfolios. In some cases, the appeal is with the ETF’s typically-low-cost structure; in other cases, it’s a matter of the ETF’s tax efficiency; and more recently, ETFs have gained further market share as more and more asset classes, strategies, and managers are rolled out in ETF form. In fact, during 2020 in the midst of the COVID-19 pandemic, billions of new cash flowed into ETFs, to the point that they beat out mutual fund inflows last year. Yet while the popularity of passive, tax-efficient ETFs is easy to understand, the increasingly broad range of ETFs available means there are more and more ways to utilize them in an ever-widening range of portfolio strategies… raising the question of how advisors should best incorporate ETFs into client portfolios in today’s environment (and where ETFs don’t work).
At the October Kitces Monthly Webinar ETF expert Dave Nadig, CIO and Director of Research at ETF Trends, discusses how and why ETFs are so efficient, as well as where they fall down, why focusing on exposure trumps everything else, and how to understand the true total cost of ETF ownership.
In this webinar, advisors will learn:
– How advisors are actually using ETFs
– How to pick between similar types of ETFs
– Why “cheap” isn’t always great
– How to answer common client questions around ETF liquidity, crypto, and China
Learning Objectives:
LO #1: Explain how ETF shares are created and redeemed
LO #2: Differentiate the characteristics of ETFs from those of other asset classes
LO #3: Identify the different ways advisors can use ETFs in their clients’ portfolios
LO #4: Apply the process of selecting an ETF for a client portfolio
LO #5: Discuss potential client concerns regarding ETFs
Key Terms:
Exchange-Traded Fund (ETF): A type of security that tracks the performance of an underlying basket of securities, derivatives, or commodities; and is purchased and sold on a stock exchange.
Mutual Fund: An investment vehicle made up of a pool of funds collected from investors which is invested in stocks, bonds, and other assets.
Market Maker: A third-party entity that holds shares of ETFs and other assets in inventory to provide liquidity to buyers and sellers, who makes money by quoting slightly lower prices to buy and slightly higher prices to sell securities.
Liquidity: The ability to instantly find a buyer or seller for a given security on the market.
Authorized Participant: A party that transfers securities to an ETF sponsor in exchange for shares of the ETF, selling the ETF shares to investors and market makers and making money by exploiting differences between the price of an ETF share and that of its underlying holdings.
ETF Sponsor: A party that manages the underlying investments and issues shares of an ETF
Model portfolio: A pre-defined mix of investments (typically mutual funds or ETFs) that financial advisors employ for their clients to achieve an expected return for a given level of risk.
Thematic: A type of ETF that invests in companies across multiple sectors or industries that are expected to benefit from a specific “theme” such as space exploration, clean energy, or cannabis.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1 CFP hours
- 1 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
7.7.2021
Session Description:
By removing the ‘stretch’ provision for many beneficiaries of inherited IRAs, the SECURE Act also eliminated a strategy frequently used by CPAs and financial advisors to plan around the tax challenges of large inherited IRAs. For many designated beneficiaries who are not considered “Eligible Designated Beneficiaries” (the new beneficiary class created by the SECURE Act), the stretch provision has been replaced by the 10-Year Rule, which mandates that an inherited IRA’s balance be paid out in full by the end of the 10th year after the account owner’s death. Unfortunately, this change undermines some of the common intentions of lifetime payouts from inherited IRAs, such as protecting against excessive spending or providing long-term financial security. However, one viable alternative option to maintain lifetime beneficiary income involves transferring the IRA to a Charitable Remainder Trust (CRT) upon the IRA owner’s death. Although this can preserve lifetime income for beneficiaries, there are specific rules that must be followed for the strategy to work. Unlike IRA distributions which have relative flexibility, the payout rate for CRTs must remain constant (and within certain IRS-created limitations) as determined by terms of the trust. Additionally, income from CRTs is taxed on a less favorable “worst-in, first-out” basis, whereby ordinary income is considered to be distributed first, followed by long-term capital gains, then principal, and finally tax-exempt income. Furthermore, upon the termination of the CRT (i.e., when the beneficiary dies and the specified charity inherits the remainder), the net present value of the trust assets must be at least 10% of the initial value of the gift made into the CRT when it was first established. And given the nature of how CRTs work, once the beneficiary dies, assets do not pass on to a next-in-line successor beneficiary that the CRT beneficiary can choose; instead, any remaining assets in the CRT must pass along to the designated charitable beneficiary. While these requirements may not allow for the exact distribution strategy that the client may have originally planned for, it does serve to protect the lifetime income stream of the beneficiary and provide for a favorable outcome. Join us to learn more about the strategies and nuances of using a CRT to provide clients with the benefit of a lifetime payout.
Learning Objectives:
LO #1: Examine how the SECURE Act changed the stretch IRA and the impact of the 10-Year Rule.
LO #2: Examine the process of establishing a CRT and understand the factors to consider when designing the CRT payout.
LO #3: Review taxation as it applies to the CRT, the estate, and the human beneficiary.
LO #4: Understand what client factors planners should consider when suggesting the CRT.
LO #5: Examine challenges of the CRT and potential ways to offset them.
Key Terms:
Setting Every Community Up For Retirement Enhancement (SECURE) Act: Signed into law by President Donald Trump on December 20, 2019, this piece of legislation will have the largest direct impact on retirement accounts since the passage of the Pension Protection Act in 2006.
Section 7520 Interest Rates: This rate is revised monthly by the IRS. It is equivalent to 120% of the applicable Federal midterm rate. It is used to discount the value of annuities, life estates, and charitable interests in trusts to present value.
Applicable Federal Midterm Rate: This rate is considered the minimum allowable market rate for loans and is published monthly by the IRS; it is the obligation of maturities of more than 3 years up to 9 years.
Charitable Remainder Trust (CRT): This is a type of remainder trust that can be used by charitable individuals to give assets to a charity (and to beneficiaries) while receiving some tax benefits for doing so. Two main types of CRTs are Charitable Remainder Unitrusts (CRUTs), which distribute a fixed percentage of the trusts’ balance to beneficiaries, and Charitable Remainder Annuity Trusts (CRATs), which distribute a fixed dollar amount to beneficiaries.
CRUT’s Breakeven Point: This is the amount of time it would take for wealth created via distributions from a CRUT to catch up to wealth created via leaving the same amount of money to beneficiaries directly.
5-Year Rule for Inherited Retirement Accounts: The rule applying to non-designated beneficiaries where all assets must be out of an IRA by Dec. 31st of the fifth year following the year of the original IRA-owner’s death.
10-Year Rule for Inherited Retirement Accounts: The new rule created by the SECURE Act that requires IRA beneficiaries to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1 CFP hours
- 1 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
4.15.2021
Session Description:
Despite being a requirement for FINRA-registered brokers and insurance agents and a matter of fiduciary protection for registered investment advisors, most financial advisors today give short shrift to risk tolerance questionnaires. But does this really mean that risk tolerance questionnaires are universally worthless, and that there’s no value in trying to measure a client’s risk tolerance by any means? Absolutely not! Instead, what’s necessary is to delve deeper on both fronts. This session will explore exactly what risk tolerance is, what risk tolerance questionnaires are trying to measure, and will consider what’s required to design a high-quality risk tolerance questionnaire that will provide a useful assessment of a client’s risk tolerance.
Learning Objectives:
LO #1: Understand the new risk profile paradigm.
LO #2: Define the three risk components of the new paradigm.
LO #3: Be able to distinguish between risk capacity and risk tolerance and evaluate how the new risk profile utilizes both of these components.
LO #4: Identify how risk perception changes and list the common mental heuristics associated with risk perception.
LO #5: Define the two risk attitude approaches. Explain the pros and cons of each approach.
Key Terms:
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 or would be required to take to achieve the specified goal. It 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 shortcuts that individuals use to make decisions faster.
Availability heuristic: When a person uses the most “available” (e.g., convenient, easy, most accessible) information or option to make a decision.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
5.17.2021
Session Description:
Portfolios, just like people, do not exist in isolation; they are not islands. With that idea in mind, this webinar aims to answer questions such as: “How does one build an appropriate portfolio for an investor in the decumulation stage?” and “What risk factors and preferences should be incorporated?” In this webinar, financial planners will consider not only the portfolio itself, but also what total wealth encompasses (human capital as well as obvious financial capital), the client’s goals and timeline, and what it means to have an income focus. Ultimately, efficient portfolios are uniquely designed for each client; there is no single efficient portfolio that will be appropriate for all retirees. Additionally, building efficiency for your client requires a ‘total wealth’ perspective.
Learning Objectives:
LO #1: Identify how each concept of an efficient total wealth portfolio (the total wealth, equity allocation, and age) impacts the success of that portfolio.
LO #2: Understand the impact of pension wealth on total wealth and taking risk in a portfolio.
LO #3: Understand how the retirement goal itself can fundamentally change the efficiency of a portfolio.
LO #4: Identify not only how clients often think about generating income in retirement, but also how different asset types generate income in different rate environments.
LO #5: Identify the impact of time on a portfolio and the impact time has on the types of assets in that portfolio.
Key Terms:
Efficient Frontier: A principle introduced by Modern Portfolio Theory, originated by Harry Markowitz, which represents the theoretical relationship between a portfolio’s maximum return and varying levels of risk. It is used to design asset allocations, and portfolios that fall on the efficient frontier curve are considered to be ‘good’ portfolios.
‘Mountain’ Chart: A common chart used in financial planning analyses that shows assets accumulating over time, reaching a peak, and then decreasing as the portfolio is spent down. The resultant curve resembles a mountain-like shape.
Human Capital: Net Present Value of your future earnings.
Pension wealth: A guaranteed income stream that will be paid for the recipient’s life. It is very bond-like and can have huge impacts on how individuals think about their wealth and the risk that they can or cannot take.
Price return: The return on equity positions.
Time diversification: The often-debated belief that holding equities becomes less risky with more time.
Buckets: A savings strategy for thinking about risk, client behavior, and time.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1 CFP hours
- 1 NASBA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
2.4.2021
Session Description:
What contributes to overall life satisfaction in retirement? How can advisors help clients to maximize life satisfaction in retirement? Join us and learn the answers to these questions while also brushing up on the latest research on retirees, retirement spending, and retirement behavior. In this webinar, we will examine topics such as health, wealth, relationships, spending, and some of the psychological fears and joys faced by clients as they set goals to enjoy retirement.
Learning Objectives:
LO #1: Examine what actually makes people happy in retirement.
LO #2: Understand recent research on life satisfaction and retirement spending.
LO #3: Examine the psychological impact of guaranteed retirement income.
LO #4: Examine some of the physical and emotional considerations that can impact retirement satisfaction.
LO #5: Review planning considerations specific to working with individuals in retirement, especially for clients expecting to live into their 80s and 90s.
Key Terms:
Word Recall Test: A cognitive test that helps to show how cognitive decline happens gradually with age. The test requires you to repeat back 10 words that you were told earlier in a conversation. The test gets harder and harder for individuals to do as they age.
Qualified Longevity Annuity Contract (QLAC): This is a type of deferred annuity that can be funded with investments from either a qualified retirement plan or an individual retirement plan. The annuity provides monthly payments that are guaranteed until death and shielded from stock market returns. The money used to buy the QLAC is exempt from RMDs until payout begins.
Cognitive Theory: This is a psychological framework that explains how humans process thoughts and make decisions.
Crystallized Intelligence: The knowledge, facts, and information a person accumulates over a lifetime.
Fluid Intelligence: An individual’s ability to solve problems and use abstract reasoning.
Required Minimum Distribution (RMD): This is the minimum amount that account owners from certain retirement plans must withdraw annually starting with the year that they reach 72.
Annuity: This is a financial product that provides a fixed sum of money paid to someone each year, typically for the remainder of their life.
Pension: This is a type of employer retirement plan that provides income in and through retirement.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
1.12.2021
Program Description:
Executive compensation is a complex subject matter area for clients and their advisors. In this webinar, we will take a deep dive into advanced planning strategies for NSOs and ISOs. Join us and understand the different strategies that apply specifically to stock options, restricted stock shares, and restricted stock options, starting with the client objective (risk reduction, liquidity, tax minimization, wealth accumulation, hedging, or wealth transfer).
Learning Objectives:
LO #1: Examine strategies pertinent to both employee stock options and restricted stock grants.
LO #2: Identify the needs for advising executives and how to explain issues and variables related to executive compensation.
LO #3: Examine how exercising stock options impacts different goals around creating wealth, minimizing downside risk, or reducing taxes.
LO #4: Examine how Restricted Stock Units (RSUs) impact different goals around creating wealth, minimizing downside risk, or reducing taxes.
LO #5: Identify how Restricted Stock Shares impact different goals around wealth creation, minimum downside risk, or reducing taxes.
Key Terms:
Non-Qualified Stock Options (NSOs): Commonly issued employee stock options provided to many types of employees. NSOs can also be granted to individuals who are not employees of the company or on the company payroll. NSOs are not as advantageous tax-wise as ISOs, as the profit on NSOs is taxed as ordinary income.
Incentive Stock Options (ISOs): ISOs are a less common type of employee stock option and are provided mainly to C-suite or top-level executives. ISOs can only be granted to employees of a company, and they are tax-advantaged as the profit on ISOs is taxed at the capital gains rate.
Bargain Element: A bargain element is an option that can be exercised below the current market price, providing an immediate profit.
$100,000 Rule: The $100K rule limits employees to receive a maximum of $100K of exercisable options (based on the stocks’ aggregate fair market value) as incentive stock options each year. Stock options in excess of $100K in one year are treated as NSOs by the IRS.
Time-Based Exit Strategy: Exercising and selling a percentage of stock options in the last few years before expiration.
Price-Based Exit Strategy: Exercise and sell when stocks trade in a pre-determined price range.
Tax-Based Exit Strategy: Exercise and sell relative to the impact on ordinary income tax rates.
Restricted Stock Units (RSUs): Compensation issued to certain employees providing them a conditional interest in shares without any value until certain vesting requirements are met. As such, they are considered to be ‘phantom’ stock until vested and do not produce dividends nor do they provide any voting rights.
Restricted Stock Shares: Similar to Restricted Stock Units (RSUs), except that Restricted Stock Shares transfer actual stock ownership on the date of the grant, produce dividends, and provide voting rights. Like RSUs, though, Restricted Stock Shares are non-transferable, taxed at ordinary income, and have no limit after vesting.
SEC 10b5-1 Plans: Pre-arranged plans that provide a trading vehicle for insiders and affiliates to sell predetermined numbers of shares during pre-determined blackout periods.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
1.12.2021
Session Description:
Change is a normal part of the way advisors work with clients, but helping clients change can be difficult and the best way to go about it is not always clear. For instance, those in helping positions often inadvertently create more resistance to change than if the person had just tried to change on their own. In this webinar, advisors will learn about resistance and ambivalence, what causes them, and what to do about them. Join us and learn about the nine proven techniques to help clients change.
Learning Objectives:
LO #1: Identify the theories of financial psychology and how they pertain to changing behavior.
LO #2: Identify the differences between planning, coaching, and therapy.
LO #3: Examine the research on clients’ financial engagement and how engagement has been shown to move clients forward.
LO #4: Examine resistance and ambivalence to change and how advisors play into client resistance.
LO #5: Identify and describe the nine techniques related to client change.
Key Terms:
Financial Flashpoint: An early life event or series of events surrounding money that are so emotionally powerful they leave an imprint into adulthood; money experiences.
Money Scripts: This is a belief about finances passed down through generations, typically developed in childhood. They are often subconscious, based on partial truths, and impact behavior.
Money Disorders: These are maladaptive patterns of financial beliefs and behaviors that lead to clinically significant distress and impairment in social or occupational functioning, undue financial strain, or an inability to enjoy one’s resources.
Resistance: What bothers us most in work and relationships; when advice is ignored.
Ambivalence: This is the source of resistance. When part of you wants to change and part of you does not want to change.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
12.18.2020
Session Description:
How does one build an appropriate portfolio for accumulation-stage investors? What assets should be considered for an accumulator’s entire portfolio? In this webinar financial planners will consider traditional investments (stocks and bonds) alongside human capital, housing, and pension assets. Furthermore, the risk of each of these assets will be considered with the overall portfolio goal of being able to build an efficient, diversified portfolio.
Learning Objectives:
LO #1: Identify how to build appropriate portfolios for investors in the accumulation stage of their lifetime.
LO #2: Identify the different assets to be considered in an accumulator’s portfolio, more than just the financial assets.
LO #3: Identify what contributes (and doesn’t contribute) to the riskiness of human capital.
LO #4: Identify what contributes (and doesn’t contribute) to the riskiness of housing assets.
LO #5: Identify what contributes (and doesn’t contribute) to the riskiness of one’s pension assets.
Key Terms:
Human Capital: The net present value of an individual’s future earnings and the resource that is used the most to fund current expenses incurred by our lifestyles.
Housing Wealth: This is often the largest tangible financial asset in a person’s wealth and is associated with essential liabilities and expenses related to housing needs.
Pension Wealth: The is often the largest intangible asset in a person’s wealth and can include benefits from Social Security or an employer’s defined benefit plan.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
10.23.2020
Session Description:
Determining a “safe” amount of retirement spending is an increasingly popular topic amongst financial planners, yet a great deal of confusion exists about the current state of research and how it should be applied. In this session, we will explore the problems with traditional linear projections, the impact of the sequence of returns on the ability to safely retire, the current state of research on safe withdrawal rates, and the uses and potential concerns of applying the research in client situations.
Learning Objectives:
LO #1: Identify and distinguish the difference between the “safe” withdrawal rate and the “initial” withdrawal rate.
LO #2: Illustrate the impact that return sequencing has on a portfolio’s end result? Explain how inflation impacts the portfolio’s end value as well.
LO #3: List potential adjustments to Safe Withdrawal Rates
LO #4: Describe the various caveats to the safe withdrawal research that need to be considered.
LO #5: Illustrate how the safe withdrawal rate can be an effective anchor for setting reasonable client expectations
Key Terms:
4% Safe Withdrawal Rate: This is essentially the worst possible scenario based on historical data; it is the withdrawal rate that would have worked in the worst scenario we have ever seen.
Inflation: This is the general increase in prices of goods and the corresponding fall of purchasing power that inches up every year. In some environments, it can move up or down dramatically.
Dividends: These represent how much money is paid by a company to its shareholders, normally on a quarterly basis. Dividends come out of the company profits.
Capital Gains: These are the profits (if realized) from stock, land, or a business that result when the fair market value of the asset increases over its original purchase price. The gain (or loss), when realized, is a taxable event.
Principal: This refers to the initial monetary corpus that is contributed to an investment account (e.g., savings that are set aside for retirement or in a trust account).
Sequence of Returns: This is the order in which investment returns (or lack thereof) take place, which ultimately impacts withdrawal strategies and is used in some fields of retirement research that analyze portfolio returns in retirement accounts.
Risk Tolerance: This is how much risk an investor is able to tolerate within their portfolio.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
9.24.2020
Session Description:
Executive compensation is confusing financially and emotionally. In this webinar advisors will learn not only about the trends associated with executive compensation and some of the common concerns those with executive compensation plans face, but also how to think about, strategy wise, what different opportunities the different executive compensation plans may bring.
Learning Objectives:
– LO #1: Identify the financial as well as emotional concerns driving the need for executive compensation planning.
– LO #2: Identify trends in executive compensation planning
– LO #3: Identify similarities and differences between restricted stock and employee stock option plans
– LO #4: Examine the timing of different executive compensation planning options
– LO #5: Identify the differences between restricted stock and RSU grants
– LO #6: Examine the characteristics of Non-Qualified Deferred Compensation and employee stock purchase plans
Key Terms:
Overconfidence: The tendency to overestimate or exaggerate one’s ability to successfully perform a given task.
Status Quo: Status quo bias is the preference for choosing a more familiar option rather than a less familiar option, even if the less familiar option is more beneficial.
Home Country: The tendency to favor companies in one’s own country over those from other regions and countries.
Endowment: Tendency to give holdings that are owned a disproportionate value because they are already owned versus purchasing outright.
Non-qualified stock options (NSOs): The more common type of employee stock options, provided to many types of employees. NSOs can also be granted to individuals who are not employees of the company or on the company payroll. NSOs are not as advantageous tax-wise as ISOs, as the profit on NSOs is taxed as ordinary income.
Incentive stock options (ISOs): ISOs are a less common type of employee stock options, provided mainly to C-suite or top-level executives. ISOs can only be granted to employees of a company, and they are tax-advantaged as the profit on ISOs is taxed at the capital gains rate.
Bargain Element: A bargain element is an option that can be exercised below the current market price, providing an immediate profit.
100,000 Rule: The $100K ISO limit caps employees at receiving a maximum of $100K worth per year of exercisable options (based on the stocks’ aggregate fair market value) as incentive stock options. Stock options in excess of $100K in one year are treated as NSOs by the IRS.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
8.25.2020
Kitces Topic Areas:
- General Planning
Session Description:
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 is second, bi-annual survey of financial advisors. In this research-based newsletter, we begin to answer these questions about how financial planners work and compare findings from 2018 to more recent 2020 findings.
Learning Objectives:
– LO #1: Identify the different ways in which financial advisors use their time looking at both role as well as business model and CFP status.
– LO #2: Identify the difference between financial advisors’ approach to financial planning and plan delivery as well as plan components and compare this information to findings from 2018.
– LO #3: Identify how different members of a financial advisory team, depending on business channel, impact financial plan creation.
– LO #4: Examine how the financial planning relationship progresses over the first year as a client and how advisors spend their time during this first year.
– LO #5: Identify the ways in which financial planning tools impact the financial planning process and plan development.
– LO #6: Examine the practices of top producing financial planners.
Key Terms:
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 (AUM): 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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
6.30.2020
Kitces Topic Areas:
- Insurance
Program Description:
Healthcare and healthcare costs can be difficult conversations to have, let alone difficult financial planning issues to tackle. In this webinar, Dr. Carolyn McClanahan, a medical physician as well as a personal financial planner, covers how to help clients control costs by discussing (a) healthcare cost challenges and factors such as inflation, (b) health insurance choices (COBRA vs. Affordable Care Act), (c) how clients should use health insurance to be most cost effective, and finally (d), from her unique perspective as a physician, she discusses how to help clients to be empowered patients.
Learning Objectives:
- LO #1: Identify important considerations that pertain to the current inflation rate of medical expenses.
- LO #2: Understand how health care is charged and how that relates to health care costs.
- LO #3: Identify pros and cons of different insurance options from employer-based insurance, COBRA coverage, and individual plans.
- LO #4: Identify the differences between high deductible versus copay plans.
- LO #5: Identify the most important question one should always ask when making appointments and, if possible, in emergencies to best use healthcare.
- LO #6: Identify tips for how to help clients become an empowered patient.
Key Terms:
Fee-For-Service-System: This is how the healthcare system in the United States runs and it simply means the more services performed the more the system gets to charge.
Medical Mindset: This is a term that describes how certain people may be more or less prone to using medical services. For instance, some people go for any and all issues no matter how large or small, whereas others avoid going to the doctor at nearly all costs.
Guaranteed Issue: This is the rule that requires insurance companies to sell a person insurance regardless of a pre-existing condition.
Medical Underwriting: This is the rule that although guaranteed issue may exist, insurance companies can decide what to charge, which may be extremely expensive.
Deductible: The amount that the insured must pay out-of-pocket before insurance coverage kicks in and the insurance company begins to pay.
Copay: A fixed amount that the insured pays out-of pocket to pay for part of the care while the deducible is being met.
Balance Billing: When an individual uses an out-of-network provider and whose insurance company pays for the service but covers only the in-network rate, the individual will be billed for the difference between the out-of-network service expense and the covered in-network limit.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
06/01/2020
Kitces Topic Areas:
- Retirement Planning
- Taxes
Session Description:
The number of individuals with large portions of their wealth in retirement plans is growing. What is more, even though most individuals have a handful of options once they have separated from service or once they can access to their retirement plan funds (401k, 403b) many choose what is typically the worst option, a lump sum distribution. In fact, research finds that this happens about 30% of the time! In this webinar advisors will learn how to make the most out of the worst situation by taking a deep dive into Net Unrealized Appreciation. Learn when and why utilizing NUA makes sense as well as when it does not make sense.
Learning Objectives:
- LO #1: Understand what Net Unrealized Appreciation is and its rules.
- LO #2: Examine the benefits and advantages of utilizing NUA.
- LO #3: Identify the drawbacks of NUA.
- LO #4: Understand when to avoid an NUA strategy.
- LO #5: Identify the triggering events for NUA.
Key Terms:
Net Unrealized Appreciation (NUA): This is the difference in value between the average cost basis of shares of employer stock and the current market value of the shares.
Employee Stock Ownership Plan (ESOP): This is a type of plan that benefits employees in that it allows employees to gain an ownership interest in their company. These types of plans are often formed in companies to allow employees to buy stock of a closely held business entity.
Lump Sum Distribution: A distribution of money from an account that consists of one single payment (usually the balance of the account) instead of a series of multiple payments over time. This includes when an individual distributes all of their retirement plan assets from an account in a single calendar year.
20% Mandatory Withholding Rule: A rule that requires 20% of a distribution taken from an employee’s employer-sponsored retirement account to be withheld from the distribution, and that will be used to pay Federal income taxes. This rule applies when an individual takes a distribution from their employer plan and the distribution is made payable to the individual directly or is moved in-kind to a taxable account. In other words, when the distribution is not rolled over to another retirement account, the employer plan is required to withhold 20% taxes to pay for Federal income taxes.
Triggering Event (for NUA): There are four triggering events provided by the IRS that allows for NUA distributions. These events are important in regard to the opportunity to take advantage of tax-breaks for NUA funds within retirement plans.
Level of Complexity:
- CFP / IWI (formerly IMCA): Intermediate
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
4.21.2020
Kitces Topic Areas:
- Financial Psychology
- Practice Management
Program Description:
The financial services industry is stuck in a misguided era of telling people what to do and how they need to behave without taking the next steps of guiding them through a process of understanding why those actions are important. Advisors then find themselves baffled as to why their clients aren’t motivated to make good decisions and engage in positive habits. Yet, the reality is that the keys to effectively motivating clients are actually quite simple. In this educational webinar, Tim, a researcher and a practitioner, uses stories grounded in scientific research and evidence to explain how advisors can apply behavioral science and economics best practices and principles to help them engage, motivate and guide clients to better financial outcomes.
Learning Objectives:
LO #1: Identify the two different systems at work in one’s brain.
LO #2: Identify the ways in which loss impacts the client’s decision-making.
LO #3: Identify the best ways to motivate clients.
LO #4: Identify how habits are formed and why they are useful in decision-making.
LO #5: Identify strategies that financial planners can employ that use habits to help clients.
Key Terms:
System 1: This is the fast, automatic, impulsive gut feeling that drives decision-making
System 2: Slower, more thoughtful and rational system that also drives decision-making
Behavioral Economics: The intersection of economics and psychology.
Empathy: The ability to put one’s self in the client’s shoes.
Analysis by Paralysis: When an individual becomes unable to decide because they become overwhelmed by the number of potential outcomes and options.
Loss Aversion: The finding that losses hurt more than gains feel good when looking at the same magnitude of loss and gain.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
4.1.2020
Kitces Topic Areas:
- Financial Psychology
- Retirement Planning
Session Description:
This presentation examines how real retirement spending patterns change traditional retirement withdrawal strategies. Specifically, commonly used retirement spending assumptions are compared to actual retirement spending patterns of retirees. This comparison reveals that typical assumptions of constant real spending often overstates retirement spending. As a result, commonly assumptions may overstate retirement savings need. Accounting for more realistic retirement spending results in higher safe withdrawal rates than prior research has typically indicated. Typical assumptions also fail to account for the potential to make adjustments in retirement that can keep a retirement spending plan on track.
Learning Objectives:
LO #1: Identify the traditional financial planning retirement spending assumptions.
LO #2: Identify the traditional assumptions underlying safe withdrawal rate (SWR) research.
LO #3: Identify how historical retirement spending data deviates from traditional assumptions.
LO #4: Identify the implications that result from adopting more realistic assumptions.
LO #5: Identify how adjustments in retirement spending can keep a retirement spending plan on track.
Key Terms:
Monte Carlo Analysis: These are analyses that consider multiple trials and variables designed to model the probability of an outcome.
Nominal Value: An economics term referring to a value that is not adjusted for inflation.
Real Value: An economics term in which a value has been adjusted for inflation.
Replacement Rate: This refers to the ratio of an individual’s pension or average income in a given time period.
Safe Withdrawal Rate: This is the rate at which one can withdraw from a portfolio and have a high probability of never running out of money.
Risk Tolerance: This is the degree of market fluctuation a person is able to withstand.
Consumer Expenditure Survey: This is a large, nationally representative database of US consumer trends with which many studies in financial planning have been conducted.
Longitudinal Study: A type of study that involves several observations of the same person over a certain period of time, which allows researchers to look at how changes happen to that person over the time period examined.
Cross-Sectional Study: A type of study that allows researchers to compare groups of people (eg., 50-year-olds versus 70-year-olds) at one snapshot in time.
RAND Health and Retirement Study: A large, nationally representative database with longitudinal data that allows researchers to study individual behavior leading up to and through retirement years.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP / IWI (formerly IMCA) hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
2/28/2020
Kitces Topic Areas:
- Estate Planning
- General Planning
- Regulation & Compliance
- Retirement Planning
- Taxes
Session Description:
On December 20, 2019, President Donald Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act, ushering in the most significant direct changes to the laws for retirement accounts since the Pension Protection Act of 2006. The ‘headline’ from the SECURE Act is its changes to the ‘stretch’ rules for designated beneficiaries, but that’s far from the only change that will impact advisors and their clients. The SECURE Act also changes the starting age for RMDs, eliminates the age limit for Traditional IRA contributions, creates a new exception to the 10% early distribution penalty, eliminates burdensome rules that prevented wider-spread adoption of MEPSs, reversed changes to the so-called “Kiddie Tax” made by the Tax Cuts and Jobs Act, and much more!
In this session, attendees will learn about each of the major changes made by the SECURE Act, exploring both the new challenges, and planning opportunities, it creates.
Learning Objectives:
LO #1: Understand how the SECURE Act does (and does not) change the rules for beneficiary RMDs.
LO #2: Discover how the change to the starting age for RMDs impacts has ripple effects to other areas
LO #3: Explore how the QCD anti-abuse rule can negate much of the benefit to making deductible Traditional IRA contributions at 70 ½ and beyond.
LO #4: Prioritize clients whose plans may need to be revised as a result of the SECURE Act’s changes.
LO #5: Identify the SECURE Act’s non-retirement-related changes.
Key Terms:
Required Minimum Distribution (RMD): The is the required minimum amount an investor must withdraw from retirement accounts like an IRA, SEP IRA or SIMPLE IRA once a person becomes 72.
Required Beginning Date (RBD): This is the official date by which a retirement plan owner must start to take or receive their RMDs.
“As Rapidly” Rules: Pre-SECURE Act rules specified that a beneficiary just had to distribute the funds from their inherited IRA at least “As Rapidly” as the owner would have been required.
See-Through Trust: This is a type of trust that is subject to the new 10-Year Rule for inherited retirement accounts. These trusts must be valid under state law, irrevocable upon the retirement account owner’s death, contain identifiable beneficiaries, and submitted to the IRA custodian or plan administrator by Oct. 31 of the year following the year of death (or in the alternate, a certified list of trust beneficiaries can be provided by the same date).
Setting Every Community Up For Retirement Enhancement (SECURE) Act: Signed into law by President Donald Trump on December 20, 2019, this piece of legislation will have the largest direct impact on retirement accounts since the passage of the Pension Protection Act in 2006.
Gap Years: These are the years between when an individual retired and when they began receiving Social Security benefits and taking RMDs.
Qualified Charitable Distribution (QCD): One of the most tax-efficient ways of giving to charity, this distribution allows IRA owners and IRA beneficiaries (only as such transactions may not be made from non-IRA-based employer-sponsored retirement plans) who are (actual-age) 70.5 or older to transfer up to $100,000 per year from their IRA/inherited IRA accounts directly to charity.
Multiple Employer Plan (MEP): This is a retirement savings plan that has been adopted by two or more unrelated employers for income tax purposes. These plans may be defined benefit pension or defined contribution plans, such as a 401(k) plan.
529 Plan: This is a college-savings program. Each state has their own 529 plan. The plans are tax-beneficial in that both growth of the account and distributions, assuming they are for qualified expenses, are tax-free. Depending on their state of residence, some contributors can also receive a state income tax deduction.
Auto-Enrollment Plan/Automatic Contribution Arrangement: Retirement plan features common in 401(k) plans that allow employers automatically to enroll employees in their retirement plans (auto-enrollment) and initiate elective contributions (automatic contributions) for employees. Enrollment/Contribution arrangements are automatically established unless employees affirmatively elect not to participate.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 2.0 CFP / IWI (formerly IMCA) hours
- 2.0 NASBA hours
- 2.0 IWI General Financial Planning hours
- 2.0 IWI Taxes & Regulations hours
- 3.0 EA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
9/2/2019
Kitces Topic Areas:
- Investments
- Retirement Planning
- Taxes
Session Description:
Managing a client’s accumulation stage is relatively straightforward – gather the dollars as they come in, and invest them. When it comes to the decumulation stage, though, it’s not enough to merely manage the retirement portfolio; it’s also necessary to figure out how to generate the cash flows to fund retirement itself from that portfolio, and how to invest into and draw liquidations from a wide range of different types of accounts. In this session, we explore strategies to actually fund a spending plan from a client’s retirement portfolio, as well as how to generate those cash flows in a tax-efficient manner, and exploring the key elements of a withdrawal strategy, including identifying cash-flow sources (and costs), account sequencing (and finding tax equilibrium), coordinating portfolio implementation (not just asset allocation but also asset location), and making the necessary ongoing annual adjustments. Along with how to create better buy-in from clients into their retirement spending plan by developing a Withdrawal Policy Statement to go alongside the client’s Investment Policy Statement.
Learning Objectives:
LO #1: Identify and evaluate income revenue sources.
LO #2: Identify and evaluate account sequencing strategies.
LO #3: Identify the benefits and strategies associated with partial Roth conversions.
LO #4: Identify how to find and establish tax-equilibrium.
LO #5: Identify asset allocation strategies that fit with tax-equilibrium strategies.
LO #6: Identify the importance and convenience of a Withdrawal Policy Statement.
Key Terms:
Investment Policy Statement: An agreement between a client and the portfolio manager that documents general rules and information such as asset allocation and risk tolerance.
Withdrawal Policy Statement: An agreement between a client and a financial advisor that lays out the parameters of how portfolio withdrawals will be implemented to generate retirement cash flows.
Tax Equilibrium: This is the point where enough income is created or recognized now to avoid “too much” in the future, but not so much is drawn into the present that it would have been better to just defer the income and wait until later when tax rates might have been lower.
Asset Location: This concept refers to how investors can distribute their investments across different types of savings vehicles.
Roth Conversion: A Roth conversion is when one converts a traditional IRA to a Roth.
Required Minimum Distribution (RMD): The is the required minimum amount an investor must withdraw from accounts like an IRA, SEP IRA or SIMPLE IRA once a person becomes 70.5.
Tax Efficient: This is the attempt to minimize tax liability.
Bond Coupon: This is the amount the bondholder receives from the bond’s issue date until it matures.
Dividend: This is the amount that an investor receives (typically quarterly) from a company for being a shareholder.
Capital Gain: This is the profit that results from the sale of a capital asset such as a stock, bond, or real estate, where the sales price exceeds the purchase price.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
5/7/2019
Kitces Topic Areas:
- Estate Planning
- Taxes
Session Description:
Given recent changes in the law, “tax planning” for one’s estate at death has become a lot less about estate tax planning, and far more about the income tax planning opportunities at death… particularly with respect to maximizing available step-up in basis opportunities. With that in mind, attendees of this session will explore topics including how pre-death asset transfers can help maximize step-up in basis, how other types of pre-death transfers can help avoid the potential for a step-down in basis, complications associated with these strategies for clients living in community property states, and the disadvantages of traditional credit shelter trusts that emerge in an estate planning environment driven by income- (rather than estate-)tax planning.
Learning Objectives:
LO #1: Describe the different ways a decedent’s assets may be treated for income tax purposes after death.
LO #2: Examine how the post-death tax treatment of IRD assets differs from other assets.
LO #3: Identify planning considerations for when property is held jointly between spouses at death.
LO #4: Learn planning strategies to maximize step-up in basis opportunities and to avoid losing capital losses.
LO #5: Explore complications and opportunities that can present themselves when trusts are used for estate planning purposes
Key Terms:
Income in Respect of Decedent: Any type of pre-tax asset whose ordinary income tax consequences were not already recognized before the decedent passed away.
IRD Deduction: Federal income tax deduction that can be claimed by the recipient of the IRD asset for any Federal estate tax paid attributable to the IRD asset.
Step-Up In Basis Rule: This rule essentially treats the beneficiary of an asset received due to the owner’s death as though they purchased the inherited asset for its fair market value on the date of the decedent’s death.
Portability: This term applies to the Federal estate tax exemption, made permanent by the American Taxpayer Relief Act of 2012, that allows the surviving spouse to transfer any of the deceased spouse’s unused exemption amount to the surviving spouse.
IRC Section 2038 Marital Trust: This is an advanced technique to try and secure a step-up in basis for all marital assets upon the passing of the first spouse.
Joint Exempt Step-Up Trust: This trust forms a single joint trust with separate shares for both the husband and wife, where each spouse retains the right to revoke his/her share of the trust until their death.
Capital Loss: A capital loss occurs whenever there is a loss on a capital asset, such as real estate or stock; i.e. it decreases in value.
Qualified Terminable Interest Property (QTIP) Trust: A type of marital trust designed to provide for the spouse after death that at the same time protects assets for future generations.
Medicaid: This is the healthcare coverage that covers low-income adults, children, pregnant women, and the elderly.
Boomerang Period: The one-year waiting period that applies to gifting assets.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
- 2.0 EA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
10/30/2018
Kitces Topic Areas:
- Annuities
- Retirement Planning
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 2.0 NASBA hours
- 1.5 IWI General Financial Planning hours
- 0 IWI Taxes & Regulations hours
- EA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
June 30, 2018
Kitces Topic Areas:
- General Planning
- Taxes
Session Description:
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.
Learning Objectives:
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.5 CFP / IWI (formerly IMCA) hours
- 2.5 NASBA hours
- 1.5 IWI General Financial Planning hours
- 1.5 IWI Taxes & Regulations hours
- 2.0 EA hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
November 1, 2018
Kitces Topic Areas:
- Retirement Planning
Session Description:
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).
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP / IWI (formerly IMCA) hours
- 1.0 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 31, 2018
Kitces Topic Areas:
- General Planning
- Investments
Session Description:
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!).
Learning Objectives:
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
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP / IWI (formerly IMCA) hours
- 1.0 NASBA hours
- 1.0IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 31, 2018
Kitces Topic Areas:
- General Planning
- Investments
Session Description:
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!
Learning Objectives:
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
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP / IWI (formerly IMCA) hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
Course Review Date:
October 30, 2018
Kitces Topic Areas:
- Investments
- Retirement Planning
- Taxes
Session Description:
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.
Learning Objectives:
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.
Key Terms::
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.
Level of Complexity:
- CFP / IWI (formerly IMCA): Advanced
- NASBA: Basic
Specialized Knowledge:
- CFP: General Principles of Financial Planning / Investment Planning / Retirement Planning
- NASBA: Specialized Knowledge (Personal Financial Planning)
Recommended CE Hours:
- 1.0 CFP hours
- 1.5 NASBA hours
- 1.0 IWI General Financial Planning hours
- 1.0 IWI Taxes & Regulations hours
Availability:
All self-study courses will be available at least through December 31, 2023.
Live courses are only available for the scheduled date.
All of our courses are reviewed on a yearly basis and renewed or discontinued every December.
INSTRUCTIONAL DELIVERY METHODS:
- QAS Self-Study
PREREQUISITES:
- CFP, PFS, or comparable financial planning education.
ADVANCE PREPARATION:
- None
HOW HOURS ARE DETERMINED:
- CFP CE credit determined based on word count.
- NASBA recommended CPE determined based on word count.
Minimum-Passing Grade:
- A minimum-passing grade of at least 70 percent is required before earning CPE credit.
- A minimum-passing grade of at least 70 percent is required before earning CFP and IWI credit.
Links and Supplemental Reading:
- Hyperlinks to supplementary materials are provided solely for reference purposes. Additional readings are not required in order to earn CPE credits.
Print-to-PDF Functionality:
- The print icon at the top of each article page includes "Print-to-PDF" functionality which allows you to print just the central text and graphics of each article without navigational headers and the sidebar of the blog.
COURSE REGISTRATION:
Access to self-study courses is offered as a benefit of Kitces.com membership. Our catalog lists individual courses which may be completed by members.
COURSE EXPIRATION DATE:
This course will expire 12/31/2023. You must complete the qualified assessment by this date.
REFUND POLICY:
We offer a 100% refund through earlier of 90 days or your second CE/CPE quiz.
COMPLAINT RESOLUTION POLICY:
For more information regarding administrative policies such as complaints, please contact [email protected].
OFFICIAL NASBA SPONSOR STATMENT:
Kitces.com is registered with the National Association of State Boards of Accountancy (NASBA), as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.
NASAA IAR CE DISCLAIMER:
NASAA does not endorse any particular provider of CE courses. The content of the course and any views expressed are our own and do not necessarily reflect the views of NASAA or any of its member jurisdictions.