Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that the IRS issued guidance and a revenue ruling drawing boundaries around what it perceives to be legitimate uses of the increasingly popular 351 exchange strategy. While the strategy as a whole remains a viable way to manage securities with large embedded capital gains, the agency warned against certain tactics within ETFs leveraging it, including the rapid turnover of contributed securities, seed baskets that don't match the ETF's stated strategy, and transactions that appear pre-arranged. Which suggests that advisors can support clients not only in considering this strategy when appropriate but also in evaluating funds to ensure they will stay on the right side of IRS guidelines (and avoid a potential negative tax surprise for their clients in the process).

Also in industry news this week:

• The Treasury Department announced this week that it auto-enrolled more than 60 million children in the "Trump Accounts" program (though parents still need to claim the accounts to access available government and philanthropic contributions to them)
• A recent survey suggests a valuable role for financial advisors in helping hesitant clients (with the means to do so) spend more in retirement

From there, we have several articles on tax planning:

• Four mistakes related to IRAs that can't be undone (and how advisors can help clients avoid them), with indirect rollovers being a major culprit
• Why October 15th represents a key deadline for several transactions related to IRA contributions
• While the Federal government is in the midst of modernizing the IRA rollover process, advisors continue to have a valuable role to play in ensuring rollovers of workplace retirement plan assets are completed correctly (avoiding negative tax consequences in the process)

We also have a number of articles on marketing:

• The content, activity, and strategies that help advisors connect with prospective clients on LinkedIn
• A "3-2-1 Method" for consistent (but not necessarily time-intensive) engagement on social media
• How financial advisors can scale their social media marketing by leveraging evergreen content

We wrap up with three final articles, all about Artificial Intelligence (AI) and thinking:

• How thinking (and writing) for oneself can help professionals stand out at a time of increasing use of AI for these activities
• Why "cognitive delegation" in the workplace could make it harder to attribute original work to up-and-coming employees
• Seven principles for writing with (and without) AI, including the importance of maintaining an original voice

Enjoy the 'light' reading!

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Given that financial advice is usually, to say the least, not inexpensive, financial advisors often need to be prepared to explain their fee in the context of the value that is offered. This conversation includes how advisors charge for their advice and what they are charging for, especially as the fundamental value proposition of financial advice has evolved significantly over the last decade, transforming from product sales to investment management to goal-focused life planning. Yet as the financial planning process has become more holistic, it has also become more intangible in some ways. For example, the value of a product or investment management may feel immediately related to a client’s problem… but the value of goal-based spending and behavioral finance may be more challenging to articulate, in the moment, to prospects and clients.

In this 200th (💙!) episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how the value of advice has changed over time… and how to explain it to clients. Given how abstract life planning can be, when a client first engages an advisor, it is often best to start with the ‘presenting problem’ that first brought a client into the office – such as college planning, an impending retirement, or a sudden inheritance. Advisors can take that first issue as an opportunity to build trust with the client, then can slowly dig deeper from there. Opportunities to go deeper with clients often present in cash flow conversations, where an advisor can help clients explore which spending decisions will ‘actually’ make a difference in the long term.

Another component of the value of advice is related to client implementation. Many clients will acknowledge that they intended to follow through on different action items, such as estate planning or transferring accounts, but life, inevitably, got in the way. While the advice itself may be helpful, ensuring the agreed-upon actions are implemented may be invaluable for some clients. And if/when clients don’t act, that can provide another signal for a deeper conversation to see what (if anything) may be ‘missing’ from the financial planning recommendations.

When great advice is combined with implementation support, it can create an incredibly valuable experience for the client. While marketing "peace of mind" may be cliché, the reality is that it is immensely powerful to have one’s financial affairs in order (and continually updated so that they stay in order!). Ultimately, the key point is that while some components of advice shift with technology and markets, the fundamental value today’s advisors can offer is not just expertise, but a listening ear. When advisors can combine both elements, clients may be surprised not just at how much gets done, but at how aligned their financial capital is with what matters most!

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For many years, the U.S. tax code has incentivized individuals to give to charitable causes by allowing an itemized deduction for charitable contributions. Although the amount that an individual could deduct was limited to a certain percentage of their Adjusted Gross Income (AGI) based on the type of property contributed and the type of organization it was contributed to, any contribution made within those limits could be deducted dollar-for-dollar to reduce the taxpayer's taxable income.

However, under the One Big Beautiful Bill Act (OBBBA), passed in 2025, two new rules are set to come into effect for the 2026 tax year that will reduce the tax benefits that individuals receive from making charitable contributions. The first is a new 'floor' on charitable deductions that reduces a taxpayer's charitable deduction by 0.5% of their AGI (and if total contributions don't exceed 0.5% of AGI, the deduction is reduced to zero). And the second is a reduction of taxpayers' cumulative itemized deductions by a factor of 2/37ths, which takes effect only for taxpayers whose taxable income (before itemized deductions) exceeds the threshold for the top 37% Federal tax bracket.

The overall effect of the new limitations will be to slightly reduce the tax benefits of giving to charity – but only slightly, given how small the 0.5%-of-AGI floor and 2/37ths reductions are relative to the taxpayer's total income. However, the limitations will have a more noticeable effect on the ability to deduct charitable contributions for higher-income households, where the 0.5%-of-AGI floor creates a higher hurdle for deducting contributions – to the extent that for donations of smaller sizes, higher-income taxpayers might receive less of a hard-dollar tax benefit than lower-income taxpayers, despite being in a higher bracket! However, the tax benefits of charitable contributions steadily increase in favor of higher-income households for donations of bigger sizes. Which ultimately means that, rather than disincentivizing charitable contributions for higher-income households, OBBBA's new limitations actually incentivize taxpayers to contribute more as income level increases.

Although the relative impact of the new charitable contribution limitations isn't large enough to meaningfully change many individuals' giving plans, there are steps that can be taken to minimize their effect. One is to 'bunch' together several years' worth of charitable contributions into a single year to avoid being subjected to the 0.5%-of-AGI floor over multiple years, which can be aided by using a donor-advised fund (DAF) which decouples the timing of the taxpayer's contribution (and corresponding deduction) from that of the ultimate grant disbursement to another charity.  Taxpayers who don't itemize their deductions every year can take advantage of a new charitable deduction for non-itemizers of up to $2,000 that was also created under OBBBA, and which isn't subject to the 0.5%-of-AGI floor or the 2/37ths reduction for itemized deductions. And IRA owners over age 70 1/2 can consider making Qualified Charitable Distributions (QCDs) instead of deductible charitable contributions, which for individuals taking RMDs can reduce the amount of RMD income the owner is required to recognize, and at the very least can reduce the amount of future RMDs the owner needs to take.

Ultimately, while charitable giving is often done with selfless intention, tax implications commonly play a role from a financial planning standpoint as well. And so while OBBBA's new rules may not require a complete overhaul of most individuals' charitable strategies, advisors who engage in careful planning can help their charitably inclined clients get the most out of their giving!

And if you want to go deeper on this topic, hear directly from the author on the Financial Advisor Technician podcast.

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My guest on today's podcast is Dana Anspach. Dana is the founder of Sensible Money, an RIA based in Scottsdale, Arizona, that oversees $850 million in assets under management for 330 client households.

What's unique about Dana, though, is how she has stood out as a retirement planning expert by leaning into decumulation planning and running multiple tests on client plans to give them greater confidence that they will meet their retirement goals.

In this episode, we talk in-depth about how Dana holds a first meeting with new clients that includes a rough analysis of whether they appear to be on track to meet their retirement goals (where she leverages Monte Carlo analysis but is willing to accept a probability of success well below 100%), how Dana further tests client plans by calculating a fundedness ratio (comparing the present value of cash flows a client needs to the current value of their assets) that she likes to see be at least 110% or higher, and how Dana also leverages historical data to stress test client portfolios across a range of return sequences that actually occurred.

We also talk about how Dana takes an asset-liability matching approach to portfolio management that seeks to generate sufficient cash flow to meet clients’ lifestyle spending needs over the following five to eight years (further boosting their confidence that they could endure a market downturn), how Dana measures whether clients are ahead of a ‘critical path’ to identify opportunities to sell equities following periods of strong returns and extend their income ladder, and how Dana’s firm serves as the ‘architect’ for designing these client portfolios but works alongside a partner firm to execute them.

And be certain to listen to the end, where Dana shares why she uses her own in-house retirement planning software rather than commercially available products, why Dana decided to stop offering standalone financial plans (even though they had previously been a good business line for her firm), and how Dana has navigated the challenges that come with leading a growing firm (including the need to be judicious with language to avoid setting unintended expectations for team members).

So, whether you’re interested in learning about what it takes to attract and retain clients through a retirement planning specialty, implementing an investment approach that boosts client confidence in their ability to meet their goals (and in their advisor), or key decision points that arise as a firm scales over time, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Dana Anspach.

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Client referrals have long been a cornerstone of organic new client growth because they tap into a resource every established advisor already has: an existing client base. But before getting into specific referral strategies, there is a prerequisite to receiving any referrals at all: clients need to feel that the advisor provides enough value to be worth recommending. After all, referrals require clients to spend their time and put their own reputation on the line with those in their network. Clients who aren't highly satisfied are less likely to think of recommending their advisor in the first place—let alone trust the advisor to take good care of someone they refer.

The emphasis on clients 'feeling' that the advisor provides value – as opposed to simply 'providing value' – is deliberate. What matters for referrals isn't just the work the advisor does, but whether clients recognize its value. That is, value must be both created and communicated. One example identified in our Kitces Research data is the use of client service calendars, which help practices demonstrate ongoing value and avoid 'shadow work' that advisors complete behind the scenes without clients' knowledge. Practices using client service calendars have a 1.1-percentage-point greater referral-driven client growth rate than practices not using them, and a 'failure rate' (i.e., gaining no new clients via referral over the last 12 months) of less than 0.5%, compared to 9%.  This suggests that helping clients see the value being delivered can also make them more comfortable referring others.

Once advisors are running the kind of practice worth referring to, many will naturally start asking their clients for referrals.  But doing so can feel awkward for both parties; clients may feel 'put on the spot' and question whether the advisor's motivation is genuine concern for their well-being or generating additional revenue.  Interestingly, we find that asking for referrals doesn't actually correspond with getting more of them: practices that never ask have a referral-driven client growth rate of 5.4%, declining to 3.0% for practices that ask more than once per year. Which suggests that any referrals generated by asking in the moment may be offset by clients becoming less inclined to refer in the future!

What does seem to help is simply making clients aware that referrals are accepted and appreciated, thus keeping the idea top of mind without explicitly asking. Advisors can do this on their website, in standardized communications, or through regular conversations with clients.

It's also important that clients know who they should refer. Some argue that conveying an ideal client persona (ICP) creates too much of a burden by requiring clients to remember the advisor's target market and judge who fits it, ultimately reducing referrals. However, we find the opposite: knowing the ICP helps clients recognize when someone in their network is a good fit, making them more likely to refer: advisors who verbally articulate their ideal client persona for referrals have a referral-driven client growth rate of 5.0%, versus 4.3% for those who don't.

A final, often underappreciated step is simply thanking clients for referrals. Advisors who don't thank clients have a referral-driven new client growth rate of 4.2%, rising to 5.2% with a personal "thank you" correspondence and 6.5% when that correspondence is coupled with a gift.

While these strategies are all designed to help advisors increase their number of referrals, some important context is necessary for how advisors should think about referrals within their broader marketing strategy. Our research has consistently found that practices achieving standout organic growth get only 25%–35% of their new clients from referrals, compared to 60%+ for practices not achieving standout growth. Which means practices looking to accelerate growth – or overcome persistently low growth – are unlikely to get there by optimizing referrals alone. Doing so ultimately requires succeeding with other marketing strategies that demand more work and/or capital. So while referrals aren't the solution to organic growth challenges, they are an important piece of the broader marketing recipe – and these strategies can help advisors make the most of the referral potential already embedded in their client base.

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a survey indicates many financial planning clients are concerned about rising consumer costs, with healthcare expenses at the forefront. Which suggests financial advisors have the opportunity to offer value both by increasing their clients' confidence in their financial plan (e.g., by stress testing it for different inflationary environments) and by recommending adjustments that are supportive of their long-term goals (while avoiding potentially reactive, short-sighted moves that clients might consider in this environment).

Also in industry news this week:

• More than half of advisor respondents to a recent survey who use AI tools in their practices indicated that they are saving at least four hours per week from doing so, with advisors at RIAs leading the way on adoption
• RIA M&A activity is on track to see a downturn in the third quarter after experiencing a brisk pace during the first half of the year, possibly reflecting firm owners' desire to focus inwards on client service amidst economic volatility

From there, we have several articles on retirement planning:

• How safe withdrawal rates change when a retiree is looking well beyond a 30-year time horizon
• Why a particular individual's safe withdrawal rate can be harder to calculate than it might seem (and how advisors can provide significant value through ongoing plan monitoring)
• Actions advisors can consider to reassure clients who are nervous that they might be retiring at a market peak

We also have a number of articles on insurance planning:

• Analyzing the available options for individuals to maintain health insurance coverage after being laid off
• Why a job loss in one's 50s or 60s can be particularly financially burdensome (including the challenge of finding affordable health insurance coverage) and how advisors can help clients prepare for this contingency
• How financial advisors can use income planning to help clients qualify for premium tax credits when using an Affordable Care Act marketplace plan for their health coverage

We wrap up with three final articles, all about recent consumer trends:

• How it has become increasingly difficult to determine the true cost and value of a particular good amidst the rise of "shrinkflation", "skimpflation", and the loss of brand identity
• How consumers end up paying an indirect 'tax' when product marketplaces have manufacturers pay to receive top placement on their search results
• While consumers might identify troublesome trends that have emerged in recent years, taking a broader outlook can reveal the "ordinary abundance" that is ubiquitous today but would have been limited to only the wealthiest individuals in the past

Enjoy the 'light' reading!

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While a financial advisor might prefer to manage all of a client's investible assets, when clients participate in a workplace retirement plan such as a 401(k), the assets in the plan typically can't be moved to a new managed account while the client remains employed there. A key moment for an advisor, then, occurs when a client separates from service by retiring or leaving their former employer and becomes eligible to roll their workplace retirement plan into an IRA.

While there are many potential reasons to roll over the plan assets, there may also be good reasons to keep assets within the employer plan, which suggests that clients could benefit from a personalized analysis when deciding whether or not to roll over their employer plan assets. And while a financial advisor is well-positioned to perform such an analysis, the ability to generate additional fees if the client decides to roll over the assets into an advisor-managed IRA creates a significant conflict of interest.

Amidst a fractured landscape of fiduciary requirements when it comes to rollover planning (e.g., different standards for RIAs and broker-dealers), the CFP Board has released a guide to applying its fiduciary duty to rollovers. While the CFP Board's fiduciary standard applies to CFP professionals, it offers a step-by-step framework that could allow all advisors to demonstrate the value of their advice and build greater trust with their clients in the process.

Given the many potential conflicts of interest that could go unmentioned and unaddressed by those without a fiduciary duty towards their clients, CFP Board requires a Duty of Loyalty of its certificants. In the case of rollover recommendations, this means identifying and disclosing conflicts fully, obtaining informed client consent, and managing conflicts with the client's best interest.

CFP Board also offers a seven-step process for applying its Duty of Care, which allows an advisor to take a methodical approach to analyzing a client's unique situation and developing recommendations accordingly. For instance, an advisor will want to understand the full range of options available to a client separating from their employer, as well as the tradeoffs involved in different alternatives (which go beyond costs and fees to include investment options, tax planning opportunities, and other factors). Also, documenting in writing the advisor's recommendations (along with supporting reasoning) as well as the client's ultimate decision can help avoid misunderstandings and provide institutional memory for the firm.

Notably, this analysis can be useful for both a client whose first instinct might have been to roll their workplace retirement plan assets to an IRA managed by their advisor (as they might not be aware of the potential benefits of keeping assets in an employer plan), as well as those who might be skeptical of rolling additional assets into an account managed and billed on by their advisor (as they might not have considered the benefits of unified asset allocation and coordinated tax planning opportunities).

Ultimately, the key point is that while rollover conversations are common among financial advisors and their clients, the decision isn't necessarily simple. From a fiduciary perspective, it merits both a thorough analysis of the available options and their tradeoffs, and the identification and disclosure of conflicts of interest that might be present. By doing so, an advisor can foster a more trusting relationship with their client that will hopefully last well beyond the time of the rollover recommendation!

And if you want to go deeper on this topic, hear directly from the author on the Financial Advisor Technician podcast.

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My guest on today's podcast is Nate Hoskin. Nate is the co-founder of SageContent, a platform that supports financial advisors in creating video marketing content.

What's unique about Nate, though, is how his own experience using video content to generate explosive client growth in his previous advisory firm led him to want to support other advisors in creating video marketing content that actually provides a positive return on investment.

In this episode, we talk in-depth about how Nate decided to found his own advisory firm and started creating educational video content on personal finance topics, how Nate's videos initially generated 80,000 followers in short order (but not necessarily leading to new clients because his relatively younger followers weren't necessarily good matches for his firm's portfolio management focus and AUM-based fees), and how Nate changed his service and fee models (leaning into comprehensive financial planning and changing to subscription retainer fees) and soon attracted 172 clients generating close to $1 million of annual revenue.

We also talk about how Nate experienced serious stress amidst this explosive growth (leading him to raise his fees and trim down his client base), how Nate realized that his passion is in helping other advisors create video content (ultimately leading him to sell his advisory firm), and how Nate's current company offers both lighter-touch and full-service video production services that allow advisors to create effective video marketing content efficiently.

And be certain to listen to the end, where Nate shares how advisors sometimes get trapped in the middle when it comes to the length of their video content (publishing videos that are too long for platforms such as YouTube Shorts and Instagram Reels but are too short for consumers looking for a deeper level of content), how Nate views the difference between "performative marketing" (that focuses on taking action) and "performance marketing" (that focuses on the results of tactics used, and why Nate thinks that even if advisors decide to delegate parts of their video production that it's important for them to be engaged with the content as they remain the visible face speaking to potential clients.

So, whether you're interested in learning about developing effective video marketing content, converting viewers into prospective clients, or what to keep in mind when considering whether to outsource video production tasks, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Nate Hoskin.

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Although many advisors looking to sell their practices are ready to retire and cash in on the enterprise value they've spent their careers building, an increasing number of advisors are selling and staying, choosing to sell either because they believe they can grow faster by joining a larger firm with more capabilities or services, or simply because they want to offload many of the operational or compliance headaches that have taken up so much of their time when operating on their own. And in some cases, the seller is simply so upbeat on the potential of the buyer's continued growth that even though they plan to exit themselves, they want to roll over a portion of their equity into an acquirer for a period of years to have the potential for a second liquidity event (the proverbial "second bite at the apple"), ideally at the acquirer's higher valuation multiple. Taking equity can also be beneficial for advisors looking to defer a portion of the capital gains taxes associated with the sale of their practice (until the acquirer ultimately exits). Yet the reality is that trading an advisor's own equity for potentially illiquid and opaque equity in the acquirer's business presents a unique set of challenges that advisors must carefully weigh, as they can have significant economic consequences for the seller if not everything works out exactly as projected upfront.

In this guest post, Rich Chen, founder of Brightstar Law Group, explores how advisor sellers receiving equity in the acquirer's firm has become increasingly common, often 25%–40% of the seller's exit valuation and sometimes as much as 75%, and what advisors should watch out for to ensure they are getting "fair value" and the bundle of rights they are expecting for the cash they're giving up!

The rising popularity of taking equity in an acquirer's business appears to be driven in large part by the rapid growth of serial acquirers, aggregators, and other industry "roll-up" models, whose growth rates are often far in excess of what the advisor themselves could otherwise invest in. In other words, why sell the firm and reinvest the proceeds into a balanced portfolio of publicly traded securities that might grow at 8% in the long run, when the advisor can roll equity into an acquirer that will also grow with the market (as its AUM fees grow with rising client portfolios) and its organic and subsequent acquisition growth… potentially driving 15%–25%+ growth returns. In what is admittedly a "risky" small business, but one that the advisor-as-seller who ran their own business for decades may be quite comfortable with. Many buyers, in turn, want advisors (especially those who will continue with the firm post-closing) to take equity in the buyer's firm as part of the acquisition, because doing so preserves cash and provides more leverage to fund future acquisitions, while also aligning the interests of the selling advisor with the buyer.

The caveat is that while buyers may scrutinize a seller's firm to determine a value, sellers are often much more limited in assessing the buyer's business to understand whether the shares they're receiving are appropriately valued. Firms often use their own internal valuation formulas, that may truly represent a fair market value, or simply a multiple that the firm hopes to achieve in the future, with the risk borne by the seller if that growth, margin improvement, or other goals don't materialize. Sellers can at least partially protect themselves by asking for more disclosures about the buyer's valuation methodology, and a representation of the buyer's most recent external valuation or comparables (and then monitor financials ongoing by requesting information rights), but the seller's ability to negotiate is often still limited. And even a robust valuation can be undermined by dilution from subsequent acquisitions, management grants, or new capital raises between closing and exit.

In addition, it's important to recognize that not all equity received is necessarily even saleable. In some cases, equity received from the acquirer while the seller remains working at the buyer's firm will still have vesting contingencies (that might not be earned, and the buyer might even still have the right to terminate the advisor and end their vesting period). Even if vested, the shares are typically not liquid, not simply because it's hard to find a buyer for a small minority stake, but also due to the fact that operating agreements often have outright restrictions on transfers, and/or include repurchase rights that themselves might not be the most favorable terms for the seller to be compelled to sell back. And private equity sponsors and other preferred investors often sit ahead of the seller's equity class in a distribution waterfall, so the proceeds ultimately available to the seller's shares may be materially less than the headline ownership percentage implies.

Ultimately, the key point is to understand that taking equity in an acquirer's firm entails a whole separate level of risks and opportunities, beyond 'just' the effort of selling the advisory firm itself for a desirable valuation and with appealing payment terms. And while some provisions may be negotiated (if only by adjusting the valuation the seller receives for the buyer's equity shares), often complex businesses with a wide shareholder base cannot change terms for any one incoming partner… which means sellers must be especially proactive in due diligence to protect themselves and be clear about whether the acquirer's equity is really a good opportunity.

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that Anthropic announced an advisor-specific plug-in to its Claude tool, which will incorporate data from many key advisor tech tools. While the new "Claude for Financial Advisors" plug-in offers the potential to solve the long-simmering problem for advisors of integration across tools in their tech stacks, it also raises questions, including how advisors will use any time savings gained from leveraging the tool and whether these activities can create a positive ROI for the usage-based fees Anthropic charges.

Also in industry news this week:

• A survey finds that it's still early innings for many advisors in terms of their AI use, and a strong majority of respondents are seeking more time for prospecting and deepening client relationships despite the tech investments they've made
• Only 3% of clients would replace their human advisor with an AI tool, according to a recent survey, though a higher percentage have considered changing their advisor for other reasons (with communication frequency and digital presence appearing to be key factors for younger clients)

From there, we have several articles on tax planning:

• When comparing the tax benefits of donating appreciated securities versus making a Qualified Charitable Distribution (QCD), the QCD often comes out on top
• Although the IRS's introduction of a new code for custodians to report Qualified Charitable Distributions (QCDs) on 1099-R might make it easier for taxpayers to report QCDs on their tax returns, custodians might not always report those QCDs consistently, meaning it's still up to the IRA owner to make sure that what's reported on their tax return matches the contribution they made in reality
• While many advisors recommend clients convert most or all of their pre-tax retirement accounts to Roth, doing so means losing the opportunity to make Qualified Charitable Distributions (QCDs) from a pre-tax IRA – meaning that if the client has charitable intentions, they end up paying tax on the converted dollars when they could have been distributed to charity tax-free as a QCD

We also have a number of articles on generating client referrals:

• How newer firm owners can move beyond their personal network to create a sustainable referral engine
• Why getting a client to refer a friend or family member is only the first step in them becoming a client, with a firm's online presence potentially playing a major role in the referred individual's decision to move forward as well
• How advisors can generate more unsolicited referrals that actually turn into good-fit clients

We wrap up with three final articles, all about retirement lifestyle:

• A recent study ranks the best and worst states and cities for retirement based on 46 indicators falling within the broader categories of affordability, quality of life, and health care
• How retirement presents an opportunity for individuals to enjoy a slower-paced, more analog lifestyle
• While engaging with the arts can be an enjoyable activity in its own right, a recent study suggests doing so could come with health benefits as well

Enjoy the 'light' reading!

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When a financial advisor engages a new client, they are analyzing a lifetime’s worth of financial decisions that have brought the client to this point. While this often includes many great decisions, it is also likely that a client has mis-stepped along the way… or at minimum, made suboptimal decisions for their goals. Yet these conversations about a client’s past financial decisions are rarely as simple as correcting a mistake or ‘optimizing’ a portfolio – these are often the best financial decisions a client could have made at the time.

In this 199th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how to have a curious and compassionate conversation about a client’s financial past and help them lay the groundwork for the future.

As a starting point, it’s helpful to remember that every ‘less optimal’ decision carries an emotional and logistical history – at some point, that financial decision seemed to be the client’s best path forward. For example, if a client purchased a life insurance policy that no longer seems to fit their goals, the first question the advisor can ask is what problem the client was trying to solve. The advisor’s recommendation will vary widely if a client purchased that policy as an investment vehicle, was based on a friend’s recommendation, or was to lay the groundwork for starting a family.

From there, there may be an opportunity to recalibrate the client’s finances in the light of their current goals. Often, in the light of current cashflow, insurance, and investment needs, the client may be organically inclined towards change anyway. When possible, advisors can use growth-oriented language, emphasizing how they can help clients get from “here” to “there” with these financial changes – which feels more encouraging and less critical.

At times, advisors may need to be more candid about a poor financial decision, especially if it will have an outsized negative impact on their future. When this happens, it is important to be clear but compassionate about the client’s viable steps forward. And the advisor can emphasize where these ‘suboptimal’ financial decisions created good habits and strengths – for example, a whole life policy may not be the best fit for a client’s long-term goals, but it may have helped the client with building initial habits around consistently saving.

Ultimately, the key point is that when it comes to a client’s past financial decisions, it’s best to start with curiosity and the client’s motivations at the time. From there, exploring whether that decision still fits their goals is generally a viable way to help them adjust their financial reality to their current goals… and make more informed and sustainable decisions in the future!

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