FINANCIAL PLANNER'S CORNER [#002]

​"Financial Planner's Corner" is a periodic series sharing advanced financial planning techniques, foundational planning principles, practice management tips, and more.

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What About 60/30/10 Instead of 60/40? [Ben Carlson, A Wealth Of Common Sense]

"There’s a difference between going all in or all out and carving out a small allocation in your portfolio for behavioral purposes. If having that 10% piece of your portfolio allows you to stay invested in the other 90%, that’s a win.

Many investors have a hard time ever getting to a place where they can admit they need a behavioral release valve. Knowing thyself is a huge part of the investing process.

There is no such thing as the perfect portfolio but if one did exist most people probably wouldn’t be able to stay invested in it anyway.

The suboptimal strategy you can stick with is far superior to the optimized strategy you can’t stick with. The right allocation is the one that matches your risk profile, time horizon, and temperament."


The Best Way To Get Things Done [Nick Maggiulli, Of Dollars And Data]

"​My solution to this problem takes it a bit further than Burkeman. Not only should you prioritize the right things, but you should also ensure that there’s always some slack in the system. In other words, make sure you’re almost never fully utilized. Why?

Because when you’re already at 100% of your operating capacity and an unexpected emergency hits, the whole system fails. You’ve probably felt this feeling before. It’s overwhelming and you can’t figure out what to do next. It’s the same thing that happens to your computer when you have too many programs open. It doesn’t know which program to prioritize, so it freezes, and then crashes.

The same thing happens with people when we get too busy. We don’t know what to do and we can crash. Unfortunately, that single crash can decrease productivity more than a slow day once in a while. That’s why your goal should be to be about 80%-85% utilized. You may have a less productive day here or there, but this slight inefficiency will prevent larger failures when fires inevitably pop up from time to time. I firmly believe this is one of the reasons why I haven’t burned out despite working full-time and blogging every single week for over 7 years now.

My secret to getting so much done is rarely operating at full capacity."
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Why Minimizing The Costs Of Investment Products Must Be A Priority [Stefan Sharkansky, ThinkAdvisor]

"As many researchers in academia and industry have found over the years, cost is the single most reliable predictor of future performance. Morningstar reported that expense ratio is a better performance predictor than its own star ratings.

But few investors have a full command of all the costs of owning funds and the downsides of higher costs. In addition to loads and other explicit transaction costs of buying and selling funds, there are three ongoing costs that fund investors and their advisors need to consider: explicit management fees, disclosed in the expense ratio; portfolio trading costs, which are largely opaque but can be estimated from the reported turnover ratio; and taxes on distributions in taxable accounts.

None of these costs are entirely avoidable, but all have deleterious effects on the investor’s wealth and can be controlled to some degree. All can be estimated from widely available data and should be assessed by an advisor when deciding which funds to add, retain, or sell in a client’s portfolio."


Everything To Know About RMD Planning For 2024 [Roger Wohlner, ThinkAdvisor]

"For clients who are still working once they reach the age when RMDs must commence, there is an exemption from RMDs on their employer’s 401(k) as long as they are not a 5% or greater owner of the company. This is not automatic: The employer must have made this election for their plan. Note that RMDs must still be taken from other accounts such as traditional IRAs, old 401(k)s and others as required.

In some cases, it might pay to transfer retirement assets from other accounts to the employer’s 401(k). Employers again determine whether this is allowed. Generally, only retirement assets that were contributed on a pretax basis and the earnings on those assets are eligible. A key issue with this strategy is to determine if the investments available in the employer’s plan are worth investing additional retirement assets into."


What Makes Advisors Happy With Michael Kitces [Diana Britton, The Healthy Advisor]

"We measured, ultimately, it was 100+ different variables that we were testing through this process, but we found it kind of grouped into four main domains.

The first was autonomy. ... Autonomy in the context of advisors seems to show up in two particular ways: do you have autonomy in how your clients are served? 'If I can't serve my clients the way that I believe they should be served, I get really frustrated as an advisor.' It sort of makes intuitive sense, but we live in a highly regulated compliance-driven industry. So, when those lines start to clash between 'I can't serve clients the way I want to serve them and believe they should be served because I'm having limitations to my firm,' the unhappiness starts to rise.

The second domain we found around autonomy is autonomy of time. So, do I have control over my time and where and how I'm spending my time. If I'm not in control of my own schedule, if I'm kind of a slave to the business, or the boss, or the clock, or their agenda, or anything to that effect, advisor wellbeing starts to go down when those various autonomy factors start to go down."​


Benefits Of Gifting Privately Held Business Interests [Anthony Venette, WealthManagement.com]

"When gifting shares of a business, your client may take advantage of minority discounts. These discounts reflect the fact that a minority interest in a business is typically less valuable than a controlling interest in a business, due to the lack of control and marketability. By applying a minority discount to the value of the gifted shares, a client can effectively transfer more wealth to their heirs without using as much of their lifetime estate tax exemption."


Why Do Investors Keep Their Advisors? [Morningstar Team, Morningstar.com]

"When investors are given advice, they want to know why that recommendation is good for them. In other words, advisors need to communicate their value, not just in generic terms but as they apply to the goals of each client.

However, advisors must not only take the time to help clients articulate meaningful goals but also ensure that communication regarding their portfolio (such as its construction and progress) highlights how the given advice is valuable to those goals. In many ways, it’s less about what the market did and more about how much progress the investor has made toward their priorities."