Weekend Reading For Financial Planners (March 7–8)

Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with the news that recent data published by Cerulli shows that the growth of assets in the RIA channel has outpaced that of broker-dealer firms over the last decade – which suggests that broker-dealers need to modernize their recruitment incentives that were designed for recruiting advisors from other broker-dealers but aren’t enough to avoid losing increasing numbers of advisors to the independence and autonomy of the RIA channel.

Also in industry news this week:

Although RIA M&A activity has continued at a strong pace, acquirers are increasingly targeting “adjacent” businesses like CPA firms offering tax preparation in order to expand their value proposition (showing that organic growth is still an imperative for all RIAs, even for PE-backed firms that have been focusing more on inorganic growth until recently)
While many consumers rely on general-purpose AI tools like ChatGPT to generate answers to their questions, a comparison of several such tools shows that they still fall well short of performing reliably when it comes to doing investment research and analysis

From there, we have several articles on tax planning:

While tax planning is a common way for advisors to add value, giving clients guidance on tax payment – and avoiding significant under- and overpayments of quarterly estimated taxes – can be highly valuable as well (particularly as the complexity of the tax code makes it increasingly difficult for someone to intuitively estimate their tax liability in the first place)
Missing a Required Minimum Distribution (RMD) can incur a hefty tax penalty of up to 25% of the missed amount – however, the IRS allows individuals to apply for a penalty waiver in cases where RMDs were missed due to reasonable error or circumstances such as cognitive decline (which is unfortunately not uncommon among aging clients of financial advisors)
When non-real-estate-experts invest in rental property, they occasionally aren’t aware of the ability to take depreciation – and when that happens, the IRS specifies a process for correction that allows the taxpayer to make up for all of their years of missed depreciation at once (rather than amending multiple years of tax returns)

We also have a number of articles on practice management:

The hiring and team retention principles that RIAs can learn from top-performing consulting firms
The potential opportunities of offering internships to develop the next generation of advisory firm talent (and pitfalls to avoid!)
Why compensation conversations need to be bigger than one-off annual conversations – and how to tie individual compensation to firm growth goals

We wrap up with three final articles, all about (personal and professional) risk management:

Whether or not it’s worthwhile to try to anticipate and prevent every type of risk, or if advisors (and clients) should just focus on the upside, rather than unanticipated (and unlikely) adverse events
How economic shifts over time have made us wealthier than ever… but have also decreased autonomy for young people – and how to balance both purpose and guardrails in young people’s lives
Why risk tolerance goes deeper than just questionnaires, and how to help clients balance personal and financial constraints to find a fulfilling balance

Enjoy the ‘light’ reading!