Financial Advisor Reading List: November 2023

Nov 20, 2023 | Blog Posts

Thanksgiving is almost here! As we all look forward to taking some time off, visiting family, and eating way too much, here are some must-read content and ideas your clients will thank you for sharing. Something to keep us company while traveling and/or taking up space on the couch digesting!

1. Optimizing Virtual Client Meetings To Make Them More ‘Real’ And Less Exhausting
Source: Kitces.com

Advisors using virtual client meetings face challenges in maintaining effective communication and connection. Research indicates a decline in “social presence” and increased “Zoom fatigue.” Optimizing the virtual office environment, including lighting, sound, and furniture setup, can enhance the immersive and realistic feel for clients. Creating an inviting meeting background, utilizing screen-sharing options, and incorporating breaks into the agenda combat Zoom fatigue, fostering a more focused and relaxed atmosphere. 

With a modest investment in equipment and thoughtful planning, advisors can significantly improve the virtual meeting experience, expanding opportunities to work with diverse clients and thrive without geographic constraints.

2. Financial Advisors Offer 7 Reasons Why Budgeting Apps Don’t Actually Work
Source: Yahoo Finance

Budgeting apps are often criticized for their limited effectiveness due to various reasons. Julian B. Morris of Concierge Wealth Management and John Browning of Guardian Rock Wealth offer several reasons why personal budgeting apps don’t work and offer alternative strategies for achieving financial stability and success, such as macro-level budgeting, “pay yourself first” strategies, regular income reviews, and a combination of professional advice and personal accountability.

    1. Honesty and Habit Change — Many users struggle to be honest and, even when honest, struggle to change habits.
    2. Budget Micromanagement — Budgeting apps can lead to a focus on minor expenses, leading to anxiety and avoidance.
    3. Irregular Income — Budgeting apps don’t work for many people with income that changes from pay period to pay period.
    4. Lack of Income Optimization — Budgeting apps are focused on spending and ignore income optimization.
    5. Not One-Size-Fits-All — Budgeting apps tend to apply broad-stroke strategies that don’t work for everybody.
    6. Security Risks — Sharing sensitive financial information poses a financial risk in itself.
    7. Overwhelming Nature — Constantly entering data into the apps can be difficult and time-consuming, making consistent use challenging.

3. ‘Money dysmorphia’ could be keeping you from building wealth, expert says
Source: CNBC

In the realm of financial psychology, Ali Katz, an estate lawyer, identifies a concept she terms “money dysmorphia,” akin to body dysmorphic disorder, but focused on distorted views of wealth leading to poor financial decisions. She often encounters clients who believe they’re not affluent enough for significant financial planning, emphasizing the need to challenge this thinking. “[Americans] are so wealthy, we’re so rich comparatively — but then, of course, we’re comparing ourselves to Jeff Bezos and Elon Musk,” Katz says.

Katz urges Americans to recognize their relative wealth globally and highlights the importance of estate planning, considering assets like cash and investments. Contrary to the belief that investing is only for the wealthy, financial professionals like Ramit Sethi stress its accessibility and the transformative impact of consistent, long-term investing, even with modest contributions, fueled by the power of compounding interest.

4. Navigating Retirement Savings Reforms: Secure 2.0
Source: Index Fund Advisors 

The Secure Act of 2019, followed by the introduction of Secure 2.0, marked significant retirement savings policy reforms. John Dahlin, head of IFA Taxes, emphasizes the extensive changes introduced by Secure 2.0 and their potential tax implications, saying, “Every U.S. taxpayer should probably at least be aware of what has changed and what that can mean for each individual’s tax-filing situation.”

Notable adjustments include expanded catch-up contributions for those aged 60-63 in qualified 401(k) plans, an RMD exemption for Roth 401(k) savings starting in 2024, and individuals aged 70 1/2 and older can make one-time qualified charitable distributions to various trusts. Additionally, sole proprietors gain the flexibility to establish, retroactively, 401(k) plans from 2024, and new 401(k) and 403(b) plans are required to automatically enroll eligible employees at a 3% contribution rate from 2025. Dahlin recommends consulting tax professionals for personalized guidance on these changes.

5. How To Ensure Trusts Hold Up To IRS Scrutiny
Source: Financial Advisor Magazine

The Department of Justice is targeting promoters of potentially abusive tax-shelter schemes involving trusts, with increased IRS audits focusing on wealthy taxpayers who often utilize trusts in a way the IRS could deem abusive. Advisors claiming they can help set up trusts “to be exempt from income taxes or making other claims that sound too good to be true” should be avoided, says David Handler of Kirkland & Ellis LLP in Chicago. To avoid IRS scrutiny, it’s essential to understand the trust agreements, report all trust income, and seek IRS approval for planning techniques. Flexibility and attention to taxation are crucial, as trusts may endure for decades while holding substantial assets.

6. Here Are 6 Things You Should Do If You’re Laid Off Near Retirement
Source: Yahoo Finance

Losing your job close to retirement is challenging, disrupting carefully crafted plans for your golden years. Certified financial planners recommend a strategic approach to navigate this situation successfully. Key steps include assessing your financial situation, creating a detailed budget, adjusting retirement plans, tapping into emergency funds cautiously, understanding severance packages, exploring continued health coverage, and deciding on returning to work. Taking care of physical and emotional well-being is crucial during this period, emphasizing that being laid off near retirement doesn’t have to derail retirement dreams entirely if approached with the right plan. Here’s the outline:

    1. Take Stock of Your Situation — Evaluate current finances and create a budget. 
    2. Review Your Retirement Plan — Consider adjusting your planned retirement age or investment strategy.
    3. Tap Into Your Emergency Fund — Use emergency funds judiciously, but avoid withdrawing from retirement savings to minimize penalties.
    4. Understand Your Severance Package — Calculate the impact of the severance package and research options for health insurance and unemployment benefits.
    5. Decide If You Want To Go Back To Work — Perhaps early retirement is feasible, or consider part-time, freelance work, or starting a small business.
    6. Take Care of Yourself — Prioritize getting enough rest, eating well, exercising, and spending time with friends and family.

Disclosures
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.

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