Weekend Reading For Financial Planners (October 19–20)

Schwab Lays Out Firm's Tech Changes Since TD Integration

(Alec Rich | Citywire RIA)

One of the biggest stories in the RIA space in recent years was the announced merger between Charles Schwab and TD Ameritrade, 2 of the largest RIA custodians. And after months of anticipation, 7,000 advisors and their 3.6 million client accounts on the TD Ameritrade platform over Labor Day weekend last year. Of course, moving advisors over to the Schwab platform was not the final step in combining the two companies, with integration of their technology platforms and features (in particular, which pieces of TD's tech stack would survive the transition) being a top issue for Schwab and the now 15,000 RIAs on their platform alike.

Broadly, Schwab decided to maintain its Schwab Advisor Center as the firm's core custodial platform while integrating several tools from TD's Veo One platform, including the Model Market Center model management service, trading platform thinkpipes, and most notably portfolio rebalancing tool iRebal (likely a relief for many previous TD users who relied on these tools, and also a potential perk for legacy Schwab firms who now have access to them).

In addition to concerns over which software features would transfer to Schwab, another concern for advisors previously on the TD platform was whether they would be able to maintain integrations with other tools in their tech stack after the transition to Schwab. According to Schwab, they now have 250 integrations with 3rd-party tech vendors, giving advisors on the platform a measure of flexibility to use Schwab's tools, or external alternatives. (Though notably, as with all AdvisorTech integrations these days, not all "integrations" are the same level or depth of integration, so advisors still have to vet particular tools and their specific desired integrations more carefully.)

Outside of tech, Schwab said that it updated more than 50 policies in an effort to ease the transition for firms on the TD platform, including greater flexibility around setting tax withholdings (as many TD advisors integrated over the past year have complained about the policy differences between Schwab and TD that impacted their day-to-day management of client needs). In addition, the company said that over the next year it plans to add more providers to its institutional no-transaction-fee share class, improve efficiency around alternative investing, offer better banking solutions, and integrate more advisors onto iRebal.

In the end, while Schwab stood to add thousands of firms to its roster as a result of its acquisition of TD Ameritrade, it had to convince firms to remain on their platform (not unlike the need for an advisory firm to court the clients of a firm it acquires), particularly given the many custodial platform alternatives available to RIAs. And while Schwab likely has bought goodwill from firms formerly on TD's platform by bringing over several of TD's popular tech tools, it remains to be seen whether firms that did make the transition to Schwab will remain there for the long haul (perhaps also influenced by the service level they receive at the now-larger Schwab), or if RIA custodial competitors will be able to pick up market share from the market leader?

43% Of Advisory Firms Are Frustrated With Their CRM's Effectiveness: F2 Survey

(Lilly Riddle | Citywire RIA)

Client Relationship Management (CRM) software can be one of the most valuable parts of an advisory firm's tech stack, as it supports service teams in both the sales process with prospective clients and, more substantively in the context of advisory firms, in the ongoing management of the entire client relationship lifespan. In fact, according to Kitces Research on Advisor Technology, with a 94.2% adoption rate, advisors are more apt to use a technology solution for CRM than for any other advisory function. However, a recent study suggests that many firms are not fully satisfied with their current choice of CRM software.

According to a survey of 66 wealth management firms by F2 Strategy, 43% of respondents said they are frustrated with their CRM's effectiveness, with integrations and workflows remaining top points of frustration and a third of those who expressed frustration citing challenges in customizing the tool to their needs as a problem. The report highlighted that firms that hire skilled individuals or teams to manage their CRM consistently experience greater success (as doing so could help a firm make the most of its software and achieve the efficiencies and functionalities it desires from its CRM.

Overall, those surveyed gave their CRM a Net Promoter Score (NPS, which subtracts "detractors" from "promoters" of a good or service) of -32, an improvement over F2's 2022 survey (which showed a -46 NPS), though still demonstrating a relative lack of enthusiasm among respondents for their CRM software (although the percentage of firms searching for a new CRM dropped from 18% in 2020 to 6% in 2024). Notably, Kitces Research has found greater advisor satisfaction with their CRMs, with respondents giving it an average satisfaction rating of 7.6 on a 10-point scale. This possibly could be due to a different balance of CRMs used, with Kitces Research respondents most likely to employ advisor-specific CRMs like Redtail (26.9%) or Wealthbox (23.2%), more so than the more general business CRM Salesforce (17.3%). The Kitces Research study found that the former 2 tools were more likely to be used by smaller firms, while a majority of firms with at least 10 servicing advisors used Salesforce (perhaps as the larger firms were able to expend resources to customize Salesforce to meet their specific needs and take advantage of its full functionality).

Ultimately, the key point is that since CRM technology is a crucial piece of a firm's tech stack for both prospecting for new clients and servicing current ones, choosing a specific piece of software that matches the firm's most important use cases for it and can be customized to meet its needs, whether it is an advisor-specific CRM or a more generalist tool customized to its needs (perhaps in conjunction with an advisor-specific CRM overlay tool), could lead to greater advisor satisfaction, and, perhaps, more effective marketing and client service.

The 2025 Social Security COLA And Other Numbers For Advisors To Know

(John Manganaro | ThinkAdvisor)

Social Security retirement benefits are an important part of the income picture for many seniors. Not only because of the base benefit they receive, but also because annual Cost Of Living Adjustments (COLAs) attempt to keep these benefits on pace with inflation (so that the benefits' purchasing power doesn't erode over time). Which can be significant in years with high inflation; for example, amidst elevated inflation in 2022, the COLA for 2023 was 8.7%, the highest increase in 40 years.

However, as the annual inflation rate has declined, so too has the COLA, with the Social Security Administration announcing last week a 2.5% COLA for benefits paid in 2025, bringing the average projected monthly retirement benefit up to $1,976. In addition, the new year brings other inflation-related adjustments to Social Security that can affect planning clients as well. These include an increase to the FICA wage base from $168,600 to $176,100 (i.e., wages above this amount are not subject to Social Security payroll tax). Also, the retirement earnings test limit (i.e., the amount of work-related income a person can have while claiming benefits before retirement age without facing benefit reductions) will increase in 2025 to $23,400 from $22,320. Finally, the income levels needed to be subject to Income-Related Monthly Adjustment Amount (IRMAA) surcharges (which might be more applicable to many financial planning clients) are expected to increase as well, though the official figures have not yet been released.

Altogether, the announcement of the latest Social Security COLA presents several potential talking points for financial advisors in upcoming client meetings, from adjusting expected benefits to be received by retired clients in planning software to checking whether the client's income puts them near the next IRMAA threshold to having a broader discussion about the future of Social Security's sustainability and how these benefits fit within a client's retirement income plan for the coming year and into the future.

Lowered Part D Prescription Drug Cap Tops Medicare Changes For 2025 

(Mark Miller | Morningstar)

Choosing the right Medicare coverage is a key financial decision for seniors, and, importantly, it's not just a one-time action. The Medicare open enrollment period, which runs from October 15 through December 7 each year, allows Medicare beneficiaries to make a variety of changes to their coverage. Because plan costs and benefits can change each year (along with a beneficiary's health care needs), reviewing current coverage and making appropriate changes can save Medicare enrollees significant money on premiums and out-of-pocket costs.

Some of the most significant changes for the 2025 coverage year concern Part D prescription drug coverage. For certain seniors, the most relevant change will be a reduction in the cap on out-of-pocket spending on prescription drugs from $3,300 to $2,000. A study from AARP found that, on average, 40% of Medicare drug plan enrollees who hit the new cap between 2025 and 2029 will save $1,000 or more, with 12% seeing savings of more than $3,000. Given that insurance companies might raise premiums to account for the new cap, the government offered a program subsidizing drug plans, limiting permitted premium raises among participating insurers to $35 per month.

Zooming out, those with Part D coverage will encounter deductibles of no more than $590 per year (with some plans offering lower deductibles, often with the tradeoff of higher premiums) followed by an initial coverage phase where they are responsible for paying 25% of overall drug costs up to the $2,000 out-of-pocket cap, after which they will have to pay nothing (notably, the cap doesn't include premiums or drugs not covered under Part D or a senior's specific Part D plan). Also, for the first time Part D plans are required to offer a Medicare Prescription Payment Plan, which allows individuals to spread expected costs across the calendar year instead of paying in one lump sum (which could strain the budgets of some retirees).

Altogether, the annual Medicare open enrollment period gives financial advisors an opportunity to add value for clients on Medicare by ensuring they have the coverage that meets their health needs and financial wherewithal, from reviewing their Annual Notice of Change (which includes updated premiums and coverages for their current plans), to seeing whether there are changes in the "tier" placement of the drugs they use (which could affect cost-sharing or access rules), to reviewing available options for the coming year for their specific geographic area (with Medicare's Plan Finder tool available as a handy resource to do so).

5 Medicare Mistakes Clients Make (And Advisors Can Help Fix)

(Rick Fine | Sensible Financial Planning)

Financial planning clients nearing or in retirement are likely to understand that Medicare will play a major role with regard to their health care in retirement. However, the Medicare system itself can be challenging to fully comprehend given the various coverage options, expenses, and deadlines involved, giving financial advisors an opportunity to educate clients on how it works, correct misconceptions they might have, and ensure they are enrolled in the best coverage to meet their needs.

To start, many clients might assume (given that they've paid into the Medicare system through payroll taxes throughout their careers) that Medicare coverage is completely free. Whereas, in reality, several parts of Medicare (e.g., Part B medical coverage and Part D prescription drug coverage) require an enrollee to pay premiums. Further, even if a client understands that they will have to pay premiums, they might not be familiar with Income-Related Monthly Adjustment Amount (IRMAA) surcharges, which apply to participants above certain income thresholds and can increase their costs further. Also, when a client is nearing age 65, they might not be familiar with the important enrollment deadlines (e.g., the 7-month-long initial enrollment period, which includes the 3 months before they turn 65, the month they turn 65, and the 3 months after they turn 65), which, if missed (and if an exception, such as continuing employer-based health coverage, does not apply), can lead to penalties on premiums for the rest of their life. In addition, once enrolled in Part B, participants have a 6-month Guaranteed Issue (GI) period for Medigap plans; if this window is missed, the individual might have to undergo a medical review to obtain coverage (which could result in higher premiums or denial of coverage), though some states offer an annual GI period.

Another potential mistake clients might make is to assume they don't need to sign up for a Part D prescription plan because they currently don't take many prescription drugs. However, given the sometimes-unpredictable nature of health outcomes and the often-high costs of prescriptions without coverage, a Part D plan could make sense for these individuals in some cases. Relatedly, spouses might choose the same prescription drug plan by default; however, given that they will likely have different prescription needs, each might benefit from different types of plans (e.g., how different drugs are covered). Finally, some clients might assume that Medicare enrollment is a one-time task and that they will remain on the same coverage for the rest of their lives; however, the annual open enrollment period offers the opportunity to make a range of changes to coverages (given that premiums, deductibles, and/or coverages for certain plans can change each year).

In sum, financial advisors have the opportunity to support their clients by ensuring they enroll in Medicare at the appropriate time, select the plans that best meet their needs, review coverages annually, and managing their income to mitigate IRMAA surcharges, potentially savings them thousands of dollars in the process!

End-Of-Year Medicare Planning Opportunities During The Open Enrollment Period

(Jeffrey Levine | Nerd's Eye View)

The final weeks of the year are some of the busiest for financial advisors as they help their clients not only plan for the upcoming year but wrap up their planning for the current year before it ends. Often, that work is heavily geared towards end-of-year tax planning strategies, such as partial Roth conversions, tax loss (or gains) harvesting, and/or deduction bunching under the Tax Cuts and Jobs Act. But the end of the year also offers advisors the opportunity to help clients over 65 potentially save money (or preserve access to key doctors) during the annual Medicare open enrollment period, by making changes to their coverage (which then take effect on January 1) that generally can't happen during the other 44 weeks of the year.

The first key adjustment opportunity – and important annual review process – is to assess whether any changes need to be made to a Medicare enrollee's Part D prescription drug plan, as providers do change formularies (the list of available favorably-priced drugs) from year to year, and failure to monitor the situation can lead to a spike in medical costs if key drugs are suddenly no longer covered. For those who are over age 65 and don't have a Part D prescription drug plan, the next option during the annual open enrollment period is to add one. The caveat, however, is that, for individuals that did not sign up for Part D during their initial enrollment period, they will almost certainly have to pay an ongoing "late enrollment penalty" in addition to their regular premiums, unless they have "creditable coverage" from another prescription drug plan in retirement. Though for those who already face a late enrollment penalty, waiting further will just further increase the penalty from here!

In some cases, though, the key Medicare change opportunity is not just to switch Part D prescription drug plans, but to change the entire Medicare plan itself – from original Medicare to a Medicare Advantage (Part C) plan, or vice versa. Medicare Advantage plans are offered through various private insurance companies (rather than through the Federal Government) and are often lower cost than traditional Medicare (with often an even wider range of benefits, including not only Part B and Part D coverage but sometimes even dental and vision coverage as well). However, Medicare Advantage plans encourage (or really, require) individuals to utilize providers with whom the carriers have negotiated concessions and discounts (i.e., in the Advantage plan's "network"). Which means it's necessary to monitor the plans each year to ensure that the desired doctors are available, or otherwise switch plans to another that includes the desired doctors. And those who relocate may wish to switch altogether into (or out from) a Medicare Advantage plan, as the quality of network (and therefore popularity of the plans) varies tremendously from one geographic region to another.

Ultimately, though, the key point is simply to recognize that, while the last couple of months of the year are especially hectic, there are several opportunities for planners to add real value for their clients. And for older clients, it could mean helping them perform an annual 'check-up' on their Medicare coverage, which can end up saving them not only time and money, but also can ensure that they continue to see the doctors they want to see (and take the prescription drugs they want/need to take) in the first place.

Risk Tolerance Questionnaires: Useful Or Pointless?

(Suzanne Highet | Advisor Perspectives)

The process of assessing an investor's risk tolerance is all about determining their willingness to take investment risk, and financial capacity to bear risk, and blending it together to match to an appropriate investment portfolio. Most commonly, this is done with a risk tolerance questionnaire that posits a series of questions about time horizon and need for income, and attitudes about risk and market volatility, to calculate a "risk score" and determine the portfolio that goes with it.

The caveat to this one-dimensional approach, however, is that by averaging together risk tolerance and risk capacity scores, the advisor can unwittingly end up in situations where clients with extremely low risk tolerance (or risk capacity) end up with portfolios that are far too risky for their situation. In other words, the low risk tolerance (or capacity) should have acted as a constraint to the investment policy statement, but didn't.

Which suggests that, rather than providing a single metric that can be used to craft a client's asset allocation, the results of risk tolerance questionnaires can serve as a jumping-off point for further dialogue between the advisor and their client. To start, asking the client to reflect on the results of the questionnaire could uncover additional information. For instance, a client might reveal while they hypothetically have high risk tolerance, they have previously acted impulsively during previous bouts of market volatility (in which case they might be more willing to take risk if they know an advisor is managing the portfolio!). Further, these conversations can reveal a client's communication preferences; for example, some clients might want their advisor to proactively reach out to reassure them during market declines, while others might be content waiting for the next regularly scheduled meeting to discuss portfolio performance. And at a more basic level, this conversation can uncover a client's true fears (and the reasons behind them), which could be losing money, missing out on opportunities, running out of money altogether, or something else.

Altogether, an approach combining standardized risk tolerance questionnaires with follow-up conversations can give an advisor a more complete view of a client's risk tolerance, which combined with their risk capacity, can help an advisor create an appropriate asset allocation and overall financial plan that accurately meets their financial and psychological needs (and fulfills compliance responsibilities in the process!).

The Value Of Incorporating "Career Risk" Tolerance In Financial Plans

(Meir Statman | The Wall Street Journal)

When it comes to thinking about risk for a client, financial advisors are often focused on investment risk (perhaps appropriately so, given that it's a lever that they can control directly). Nonetheless, while investment risk no doubt has a role in a client's financial wellbeing (particularly as they accumulate more assets), other types of risk can also play an important part in determining a client's financial future.

For instance, given that most individuals' wealth is built up through their income (or, more specifically, what they are able to save based on their income), "career risk" is a key part of a client's overall financial picture. While a career-risk-tolerant client might be willing to change employers (or even fields) regularly in search of higher salaries (but less-certain work conditions), another client might prefer career stability (even if it means sacrificing income upside). While there is no 'right' answer in these situations, financial advisors can support both types of clients, for the former by demonstrating the potential upside of a job move (and the potential downside, if any, if it doesn't work out) and for the latter by showing the long-run implications (both positive and potentially negative) of having a stable career with limited salary upside. Notably, an individual's career risk tolerance could change over time; for example, a younger client might be more willing to take career risks for potential upside in income (and job satisfaction), while an older client might not want to risk their income level as they approach retirement (though perhaps some individuals could take on high levels of career risk in retirement if the income earned is not needed to fund their basic lifestyle needs!).

In sum, given that both investment and career risk tolerance can affect a client's ability to grow their wealth and meet their ultimate financial goals, financial advisors can potentially craft more effective financial plans by incorporating both into plan assumptions (e.g., rate of return, standard deviation, and income trajectory) and planning scenarios (e.g., the potential upside and downside implications of a career change)!

How Much Does Risk Tolerance Change In Retirement?

(Nicki Potts | Morningstar)

Retirement is a major transition, both in terms of lifestyle (as an individual adjusts to no longer having a fixed work schedule) and financially (as they will no longer receive a steady paycheck from a job). Given this transition, it might be expected that retirees' risk tolerance to be significantly lower than their working counterparts given the potential for a market downturn to reduce the size of their portfolio (and perhaps limit their retirement income).

However, data from the Morningstar Risk Tolerance Questionnaire indicates that this effect is more muted than might be expected. For instance, while those between ages 40 and 49 had an average risk tolerance of 52.86 (on a 100-point scale), this 'only' declined to 49.99 for those 50-59, 47.13 for those 60-69, and 45.54 for those 70-80, showing that while there is a decline in risk tolerance (in the aggregate), it is not a particularly large difference and that other factors could play a significant role in a given client's risk tolerance as well (e.g., risk tolerance tends to increase alongside an individual's income and education levels). Nevertheless, while there was little change in the aggregate, Morningstar found that about 10% of clients had significant changes in their risk tolerance over time, suggesting that regular risk tolerance reevaluations could still be quite valuable (particularly given that an advisor might work with a client over the course of multiple decades!).

Ultimately, the key point is that while retirement brings many changes for a client, it is not necessarily associated with a major shift in their risk tolerance. Which suggests that while an advisor might adjust a portfolio of a client nearing or in retirement to mitigate against sequence of return risk, (re)evaluating a client's risk tolerance could help determine whether their views on risk have changed amidst their (coming) life transition (and whether they remain more risk tolerant than might be assumed?).

A 3-Step Process For Uncovering A Client's 'True' Financial Goals

(Samantha Lamas and Ryan Murphy | Morningstar)

Financial advisors face the challenge of eliciting specific goals from new (and existing) clients – a crucial step for crafting a comprehensive financial plan. Asking direct queries may elicit vague responses like "I want to be on track for retirement" that tend to lack the detail needed to plan effectively and spark the client's motivation to actually accomplish those goals. Which suggests that a more structured approach could better elicit more specific (and perhaps, more accurate) goals from a client.

With this in mind, Lamas and Murphy suggest a 3-step approach to help clients more strategically identify their financial goals. The first step is to have the client sit down and write down their top 3 investing goals (from the most important to the least important). The next step is to have the client review an established list of common investing goals (e.g., to relocate in retirement or to not be a financial burden on their family) and mark off the goals that are important to them. This part of the exercise not only can introduce goals they might not have considered, but also separates the process of brainstorming goals from evaluating them (potentially allowing each step to be done more effectively). Finally, clients can take both their initial list and the marked-up list of common goals and reconsider whether they want to change or refine any of the goals they initially wrote down. In the authors' research, they found that approximately 70% of people changed at least 1 of their top 3 goals after going through this process, often coming up with ideas that were more specific and vivid or reframing goals in terms of emotional and personal values instead of solely financial outcomes (i.e., helping them understand their 'why' and not just their 'what').

In the end, while many clients might have a vague idea of their goals, helping clients identify and clarify them can both allow an advisor to create more effective financial plans and help ensure that the client is moving towards (financial) goals that they truly desire!

Making Financial Plans Less Boring With Goals That Are "Not NOT Serious"

(Tim Maurer | Forbes)

When it comes to setting financial goals, there are many common answers, from "having a comfortable retirement" to "leaving a legacy for my kids" to "being able to give back to my community". However, while these are all potentially worthwhile goals, they might not be specific, or exciting, enough to get a client to take a needed action step to support their financial plan (e.g., increasing their retirement plan contributions).

While broad-based goals can still have their place, Maurer suggests that individuals consider setting one or more goals that are "not not serious" (i.e., something that isn't a set-in-stone goal but that they might want to pursue, even if it might seem outlandish today). For instance, instead of 'be able to travel in retirement', such a goal might be to "visit a Michelin-starred restaurant on each continent". Or instead of "be able to reduce my work hours in my late 50s", an alternative goal could be to "take a 2-month sabbatical to write the book that's been stuck in my head for years". In this way, a client not only can aim for a certain future state (e.g., a comfortable retirement), but also be able to "feel" what the experience will be like once they reach the broader goal.

Altogether, while broad goals can help provide direction for a client's financial plan, getting into the details of what their life will be like when they reach it (or even before then), even if an idea isn't totally 'serious', can both add more vibrancy to their financial plan and inspire them to remain on track to pursue (and hopefully reach) these goals!

Why I Prioritize Internal Drive Over External Goals

(Ryan Holiday)

When it comes to personal or professional goals, there are plenty of potential markers of success, such as reaching a certain net worth or (for financial advisors) reaching a particular level of assets under management. Further, some goals are dependent on others (e.g., trying to finish in the top 10% of runners in a marathon), which can leave control over achieving the goal out of one's hands.

Rather than chase specific external goals, Holiday instead chooses to focus on the process. For instance, instead of trying to come in a certain place in a race (something that is somewhat out of one's control), an individual could instead try to run just a bit longer each day (which is largely in their control). Or instead of making a goal of reaching a certain salary or business revenue, an alternative aim could be to provide high-quality service to others on a daily basis. Notably, prioritizing these internal processes doesn't necessarily mean that the 'big' external goals won't be achieved (in fact, consistency might make it more likely that they are reached); rather, an individual might find that they have more motivation when success is within their control and based largely on their own discipline rather than external markers or the performance of competitors.

In sum, while specific goals can provide motivation to do the 'work' needed to reach them, focusing on one's internal drive and mastering consistent processes can provide a stronger foundation that could ultimately lead to greater personal satisfaction and, perhaps, achieving more 'big' goals in the long run.

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We hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think we should highlight in a future column!

In the meantime, if you're interested in more news and information regarding advisor technology, we'd highly recommend checking out Craig Iskowitz's "Wealth Management Today" blog.