CE Catalog

8.25.2020

• General Planning

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.

– 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.

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.

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

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

• 2.0 CFP hours
• 3.0 NASBA hours
• 2.0 IWI General Financial Planning hours

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.

November 12, 2018

• Personal/Career Development
• Practice Management

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• CFP / IWI (formerly IMCA): Advanced
• NASBA: Basic
• 1.5 IWI General Financial Planning hours

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

• 1.5 CFP hours
• 2.0 NASBA hours

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.

December 4, 2018

• Client Trust & Communication
• Financial Psychology
• General Planning

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

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

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

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

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

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

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

System 2: Decision process that requires processing and thinking.

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

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

Saliency: The quality of being particularly noticeable or important.

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

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

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

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

• CFP / IWI (formerly IMCA): Intermediate
• NASBA: Basic
• 1.0 IWI General Financial Planning hours

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

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

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.

November 14, 2018

• Insurance
• Retirement Planning

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

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

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

LO #3: Identify standard premiums for Medicare coverage.

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

LO #5: Identify Medicare initial enrollment periods.

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

October 23, 2018

• General Planning
• Retirement Planning

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 2.0 NASBA hours
• 1.5 IWI General Financial Planning hours
• 1.5 IWI Taxes & Regulations hours

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.

October 25, 2018

• General Planning
• Investments

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

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

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

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

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

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

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

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

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

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

Utils: A unit of measures for utility.

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

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

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

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

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

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

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

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

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

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.

October 20, 2018

• Investments
• Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours

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.

November 9, 2018

• Annuities
• Retirement Planning

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• CFP / IWI (formerly IMCA) hours
• NASBA hours
• IWI General Financial Planning hours

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.

October 25, 2018

• Investments
• Retirement Planning
• Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours
• 1.5 IWI Taxes & Regulations hours

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.

October 20, 2018

• Investments
• Retirement Planning
• Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.0 NASBA hours
• 1.5 IWI General Financial Planning hours
• 1.5 IWI Taxes & Regulations hours

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.

December 3, 2018

• General Planning
• Investments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

October 25, 2018

• Estate Planning
• Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours
• 1.5 IWI Taxes & Regulations hours

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.

November 9, 2018

• Investments
• Retirement Planning

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours

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.

October 20, 2018

• General Planning
• Human Capital
• Investments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours

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.

October 30, 2018

• General Planning
• Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours
• 1.5 IWI Taxes & Regulations hours

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.

October 25, 2018

• General Planning
• Investments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• 1.5 CFP / IWI (formerly IMCA) hours
• 1.5 NASBA hours
• 1.5 IWI General Financial Planning hours

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.

• Client Trust & Communication
• General Planning

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

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.

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.

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.5 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

• Annuities
• General Planning
• Retirement Planning

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

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.

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.

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.5 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

• Client Trust & Communication
• General Planning

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

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. 

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.

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.5 NASBA hours

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.

• Client Trust & Communication
• General Planning
• Investments

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 

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.

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.  

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours
• 0 IWI Taxes & Regulations hours

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.

Pending

• General Planning
• Investments

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 

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. 

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. 

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours
• 1.0 IWI Taxes & Regulations hours

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.

Pending

• Client Trust & Communication
• Financial Psychology
• General Planning
• Investments

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”  

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. 

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. 

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

4.1.2021

• Client Trust & Communication
• Financial Psychology

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.

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.

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.

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.5 CFP hours
• 2.0 NASBA hours
• 1.5 IWI General Financial Planning hours

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.

4.1.2021

• General Planning
• Investments
• Retirement Planning
• Taxes

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

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.

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.

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 2.0 NASBA hours
• 1.0 IWI General Financial Planning hours
• 1.0 IWI Taxes & Regulations hours

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.

2.4.2021

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.

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.

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

2.24.2021

• Client Trust & Communication
• Financial Psychology

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

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.

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).

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 1.5 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

2.1.2021

• Client Trust & Communication
• Financial Psychology

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

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.

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.

• CFP / IMCA: Intermediate
• NASBA: Basic

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

• 1.0 CFP hours
• 2.0 NASBA hours
• 1.0 IWI General Financial Planning hours
• 0 IWI Taxes & Regulations hours

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.

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

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   

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. 

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

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

• 1 CFP hours
• 1 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

7.7.2021

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.

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.

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. 

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

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

• 1 CFP hours
• 1 NASBA hours
• 1.0 IWI General Financial Planning hours
• 1.0 IWI Taxes & Regulations hours

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.

4.15.2021

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.

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.

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

5.17.2021

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.

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.

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.

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

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

• 1 CFP hours
• 1 NASBA hours

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.

2.4.2021

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.

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.

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

1.12.2021

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).

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.

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours
• 1.0 IWI Taxes & Regulations hours

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.

1.12.2021

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.

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.

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

12.18.2020

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.

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.

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

10.23.2020

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.

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

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours

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.

9.24.2020

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.

– 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

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.

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

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

• 1.0 CFP hours
• 1.0 NASBA hours
• 1.0 IWI General Financial Planning hours
• 1.0 IWI Taxes & Regulations hours

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.