Weekend Reading For Financial Planners (February 1–2)

IAA Seeking To Manage Regulatory Burden On RIAs Amidst Turnover At The SEC

(Lilly Riddle | Citywire RIA)

Financial advisors and other investment industry participants waited eagerly throughout 2024 for the results of the presidential election to have a better idea of what the regulatory environment might look like in the coming years. With the departure of SEC Chair Gary Gensler following President Trump's inauguration (alongside the arrival of acting Chair Mark Uyeda and the nomination of Paul Atkins to lead the regulator), industry observers are now considering what changes might be in store for 2025.

For the Investment Adviser Association (IAA), an advocacy group representing investment advisers, a key priority will be managing the regulatory burden on RIAs, particularly smaller firms, given the number of rules that have been adopted recently (with some not yet going into effect), including the SEC's anti-money laundering rule. While part of this effort could include asking the SEC for extensions on compliance deadlines for various rules, looking more broadly, IAA public policy head Gail Bernstein would like to see the SEC return to a more "principles-based" approach towards regulation focusing on whether a firm has robust program controls and a strong fiduciary culture (as opposed to a more requirement-focused regulatory environment that focuses on penalizing firms for sometimes small missteps). For instance, SEC exams could be focused on identifying potential trouble spots in a firm's compliance programs (that the firm could then fix) rather than focusing on identifying opportunities for enforcement actions. Notably, the IAA could have an advocate for this approach in Atkins, as he has previously decried "regulation by enforcement" and a less heavy-handed approach to regulation more generally.

In sum, changes to the regulatory environment for RIAs could come not only in terms of the pace and type of rules that are adopted, but also in the SEC's attitude towards enforcement (both in terms of the decision of when to pursue enforcement actions as well as whether these actions target individual advisors or the firms themselves). Which could ultimately provide relief for RIAs, including smaller firms with less capacity to adjust to new and/or expanded rules, and for the many firms that act in good faith to uphold their fiduciary responsibilities (though a certain level of enforcement could be necessary to maintain public confidence in the financial advice industry?).

RIA Valuations Increased Only Moderately In 2024: Report

(Ben Mattlin | Financial Advisor)

Following a period of significant growth in RIA Mergers and Acquisitions (M&A) activity, 2023 saw a pullback in deal flow amidst rising interest rates (that can increase the cost of financing deals) and other headwinds. Nonetheless, many market participants remained positive that underlying factors driving M&A activity (e.g., infusions of Private Equity [PE] capital into large buyers and a large number of retirements among RIA founders) would mean that deals could soon pick up. These hopes turned out to be true, particularly in terms of volume, as 2024 ended up seeing a record number of M&A deals, according to data from M&A advisory firm DeVoe & Company.

Looking under the hood of last year's M&A activity, a recent report from consulting firm Succession Resource Group analyzing 176 transactions completed in 2024, found that valuations of these deals rose by a modest 1.83% over 2023 (despite an improving interest rate environment during much of the year). The firm found that 63% of transactions were completed at between 2.5X and 3.5X recurring revenue, with no deals receiving a multiple below 1.5X recurring revenue (the first time on record this has been the case). While deal valuations saw a relatively modest boost, the report found that demand increased in 2024, with sellers receiving an average of 5 offers from prospective buyers, compared to an average of 3 offers the year before. In addition, deals are being closed quicker (perhaps as large RIA aggregators hone their acquisition practices), with an average time from listing to deal completion of 129 days (a record for efficiency).

In the end, RIA M&A deal activity was robust in 2024 and could benefit from tailwinds in 2025 in the form of continued interest from (often private equity-backed) buyers and a significant number of RIAs with no succession in place (which could lead them to pursue an external sale, whether by choice or if forced to do so on short notice).

FINRA Flags Risk To Firms From Vendors' Cybersecurity Practices, Gen AI Use

(Miriam Rozen | AdvisorHub)

Each year, FINRA publishes an annual oversight report to provide its member broker-dealers with insight into findings from its regulatory operations programs (and notice of the self-regulatory organization's priorities in the coming year). Notably, FINRA's latest report for 2025, released this week, reflects both longstanding threats (e.g., cybersecurity and anti-money laundering controls) as well as emerging issues (including the use of third-party vendors).

Looking specifically at the relationship between firms and their vendors, FINRA highlights that while firms themselves might have strong cybersecurity programs, practices at third parties could vary widely, potentially putting customer data at risk. With this in mind, the report suggests that firms could consider (among other actions) compiling a list of all third-party services, systems, and software components, using it to gain awareness of potential exposures and their consequences and evaluate these vendors' ability to protect sensitive firm and customer non-public information as well as the impact on the firm's ability to meet its regulatory obligations if the vendor is unable to perform the desired function. The report also highlights vendors' use of generative artificial intelligence (Gen AI) in their products and services, flagging the risk that firm or customer data could be ingested into an open-source Gen AI tool (though the report also notes that broker-dealers appear to be proceeding cautiously with their use of Gen AI technology, largely using it for functions including summarizing information from multiple sources, conducting analyses across disparate data sets).

Ultimately, the key point is that given the ever-expanding universe of third-party technology tools and services available to advisors (as well as emerging AI technologies), ensuring that firm and client information remains secure has become a growing challenge (recognized not only by FINRA, but also by the SEC in its latest list of regulatory priorities), suggesting that conducting initial and ongoing due diligence of these vendors will be an important practice for both broker-dealers and RIAs not only to fulfill their responsibilities to regulators but also to earn and maintain the trust of their clients.

A 46-Factor Approach To Determining The 'Best' State For Retirees

(Adam McCann | WalletHub)

While financial advisors often help clients determine 'when' they can afford to retire (and how much they can afford to spend) based on their financial situation, a client's happiness in retirement not only will be influenced by the financial resources they have available, but also by where they decide to live (including the social connections, amenities, and accessibility of that location). Nonetheless with many potential choices of where to live, making this (consequential) decision can be a challenge.

In an attempt to provide a quantitative solution to this question, WalletHub analyzed 46 different factors related to wellbeing in retirement (from financial factors such as tax rates and the cost of living to quality-of-life measures such as access to leisure opportunities and medical facilities), finding that the overall 'top' states for retirees are Florida, Minnesota, Colorado, Wyoming, and South Dakota (with a bottom five of Kentucky, Louisiana, Mississippi, Washington, and New Mexico). Given that a retiree might emphasize one characteristic of a location over another, the report also provides rankings across three more specific dimensions. In terms of affordability (considering cost of living and tax-friendliness, among other factors), Wyoming, Florida, and Alabama led the way. In terms of quality of life (including the share of the population aged 65 or older, risk of social isolation, and milder weather, among other factors), Maine, Florida, and Wyoming came out on top. And in terms of health care (including family medicine physicians per capita and top-rated geriatric hospitals), Minnesota, Massachusetts, and Colorado topped the list.

Of course, at the end of the day, the decision of where to retire is deeply personal and includes factors that can't be quantified on an aggregate scale (e.g., proximity to friends and loved ones). Nevertheless, for those clients who are pondering a move in retirement, this data could provide inspiration for a destination, including states they might not have initially considered.

The Pros And Cons For Retired Clients Of Living Near Their Children

(Claymore Thistle)

The transition to retirement gives individuals who previously had to live near their office significant latitude in deciding where to call home. One popular consideration for many retirees is a desire to live closer to their children, which provides a potential two-way avenue of support, with the retirees potentially assisting with the care of grandchildren and ensuring they have loved ones close by as they age.

Nevertheless, given that research into the relationship between proximity to children and happiness in retirement is has produced decidedly mixed findings, digging deeper into the goals of such a move can potentially reveal whether it would be a successful decision. For instance, while retirees might relish both their newfound free time after leaving the workforce and the opportunity to be closer to grandchildren as they grow up, if they become 'on-call babysitters' for their children, these two priorities could come into conflict (suggesting that a conversation with their children about expectations and boundaries could be useful). In addition, clients might consider whether they would be willing to move multiple times in retirement if their child decides to relocate over the course of their parents' retirement. Further, while a move near children might provide some social support it could also take retired clients away from long-time friends in their current location (and perhaps necessitate finding new friends in their retirement destination).

Ultimately, the key point is that the decision to move near children comes with nuances that will be unique to each client. Which suggests that advisors can play a valuable role both in analyzing the financial implications of such a move and in encouraging their clients to talk through their options (with each other, in the case of married clients, and with their children), which can improve the odds that the final decision they make will be a successful one.

Why Moving To A Lower-Tax State Doesn't Always Result In Lower State Taxes On Deferred Income

(Ben Henry-Moreland | Nerd's Eye View)

Most of the time, people are subject to state taxes in the states where they live and/or earn their income. So when moving to a lower-tax state or another, their income tax burden likewise shifts to the new state along with them. Which is, for example, why so many people opt to move to lower-income-tax or no-income-tax states like Florida or Texas in retirement, where they can enjoy lower state income taxes and preserve more of their retirement savings for use by themselves or their heirs.

But like many rules, there's an exception: when a person working in one state defers some of their income, then moves to a different state (where they ultimately receive the income), that income can in certain cases be taxed by the first state (where they worked when they earned the income) even when the person now lives in a different state. In other words, moving to a lower-tax state won't always result in paying lower state taxes with particular types of income.

Specifically, USC Section 114 defines certain types of "retirement income" that can only be taxed by the states in which a person resides, which include qualified employer retirement plans and IRAs as well as nonqualified deferred compensation plans that are either paid out over a period of at least 10 years or structured as an excess benefit plan. However, other types of deferred income, including equity compensation plans like stock options and RSUs (which generally aren't taxed until after a multiyear vesting period) and nonqualified deferred compensation plans that don't meet the specific criteria above, can still be taxed by the state in which that income was initially earned, even after the employee moves to a different state.

For advisors of employees who want to minimize their state tax burden in retirement, then, understanding the different types of deferred income they may be receiving – and how (and by which states) it will be taxed – can help to recognize planning opportunities that help ensure the client's goals of lower taxes are actually met. For example, some strategies around employee stock options plans, such as utilizing Incentive Stock Options (ISOs) or making an 83(b) election on Nonqualified Stock Options (NSOs), cause income from those options to be recognized primarily as capital gains, which would be taxable only in the state where the employee lives when they actually sell the underlying stock. And for employees with access to nonqualified deferred compensation, confirming that the plan's benefits pay out as a series of substantially equal periodic payments over at least a 10-year period ensures that they meet the definition of "retirement income" under Section 114. (And because nonqualified deferred compensation is traditionally offered only to executives and other key employees, those employees may be able to influence how the plan is set up to begin with to ensure the best tax treatment!)

The key point is that when someone moves to a different state for tax purposes, sometimes the move itself isn't enough on its own to accomplish that goal, and more careful planning is necessary to see meaningful tax savings when deferred compensation is part of the financial picture. Which ultimately means that advisors with a deeper knowledge of the state tax treatment of deferred income can help make sure that their clients' expectations of lower state taxes in retirement match up with the reality.

How To Communicate Effectively With The Four Types Of Prospects

(Jane Wollman Rusoff | ThinkAdvisor)

When an advisor is meeting with a prospective client, they might offer a standard 'pitch' explaining their experience and the value they can provide the individual(s) if they become a client. However, given that prospects will have different communication styles (and service needs) a more tailored approach could prove to be more effective.

With this in mind, advisor sales consultant Nancy Bleeke Noel identifies four types of prospects: Commanders (who are analytical, logical, and process-driven), Achievers (fast-moving and accomplishment-oriented), Reflectors (consistent, detail-focused), and Expressers (people-oriented and talkative). Notably, given that advisors might only have a single meeting to make a compelling case to a prospect, identifying their 'type' quickly becomes very important. To do so, advisors can observe how the prospect speaks and moves, their word choices (e.g., whether they use 'thinking' or 'feeling' words), and the level of personal connection they prefer. Armed with this information, advisors can adjust their approach accordingly; for instance, an advisor meeting with a Commander could get right to the objective and agenda, while those meeting with an Expresser might open up with casual chatter.

In sum, even if an advisor typically works with an ideal target client (e.g., in terms of their service needs), prospect (and client) personalities are likely to vary widely, suggesting that identifying these preferences and tailoring their communication style accordingly could lead to greater connection and understanding with the prospect and, hopefully, an increased likelihood of converting them into a client!

A Simple Chart To Explain An Advisor's Value To Prospects

(Tony Vidler)

Financial advisors have well more than a hundred ways to add value for their clients and might consider touting these to prospects during discovery meetings. However, hitting the prospect on the head with a 'sledgehammer of value' (i.e., going into detail regarding every way they add value for clients) might leave them feeling overwhelmed and unsure of how their particular needs will be met.

With this in mind, Vidler suggests a much simpler approach, using a graph that any advisor can draw during a meeting. On the graph, the y-axis is labeled "success in life" and the x-axis is labeled "time", with two diverging lines extending from a point relatively low on the y-axis. The lower line is labeled "realized success" (i.e., what the client is likely to achieve on their own) while the upper line is labeled "potential success", with the gap between the lines representing the value of financial advice. Without having to get into the details of every way the advisor adds value (though subsequently addressing how they are uniquely positioned to solve the client's particular pain points could prove helpful), the graph shows how working with the advisor could allow the client to "do better, faster" than handling their financial situation alone.

In the end, while financial advisors cover a wide range of planning topics and take on a variety of tasks on behalf of their clients over the course of the year, a prospect might care less about every particular detail and more about the broader question of whether the advisor will help them achieve their financial goals faster, something the advisor could potentially demonstrate with a simple graphic!

Showcasing Value With Financial Planning Process Infographics

(Crystal Butler | Advisor Perspectives)

When meeting with a prospective client, financial advisors can sometimes find themselves spending much of the time talking about the value they can provide (while perhaps also asking questions to the prospect as well to learn more about their needs). However, given that the prospect might be new to financial planning in general, much of this information might not 'stick' with them.

In conjunction with a broader discussion of their value, advisors can also consider incorporating an infographic into their discovery meetings that provides a visual representation of the firm's planning process and how it can address the prospect's needs. Notably, such an infographic doesn't have to include every value-add or service the firm provides; rather, it can serve to walk the prospect through the firm's planning process to help them better understand what they will experience if they do become a client. Using an infographic can also give the advisor an opportunity to highlight (perhaps literally) the services that might be most relevant to the prospect (and if a firm works with multiple client personas, it could consider creating unique infographics to match each one). In addition, given the work that can go into creating them, infographics don't have to be a 'secret' revealed only during meetings with prospects and can be used on the firm's website or social media channels to capture attention and generate interest.

Altogether, using an infographic when meeting with prospects can help them better understand (both in the office and perhaps after reviewing it when they get home) how the firm can help them meet their financial goals, ultimately leading to more engaged prospects who will hopefully decide to become clients!

Why Attention Is The Most Valuable Commodity In The 21st Century

(Chris Hayes | The Atlantic)

There are some obvious locations and circumstances where it's hard to keep one's attention focused, such as the flashing lights of a casino floor or a grocery store checkout line with its candy and magazine offerings. However, with the ubiquity of smartphones (and the innumerable number of apps that can be accessed on it), keeping one's attention on a certain task or goal without being distracted has become increasingly difficult.

Hayes compares the commodification of attention (i.e., websites and apps that try to draw your attention as often as possible for advertising dollars) to the commodification of labor in previous centuries (as the economy moved from self-sufficiency and small-scale business to a more industrialized environment where a worker's labor was given a value in dollars). Eventually, workers' movements sought to put limits on the use of individuals' labor (and therefore time), at one point popularized in the expression "eight hours for work, eight hours for sleep, and eight hours for what we will". And while this goal has been achieved for many workers (with eight-hour workdays becoming a standard, though some still work longer hours), Hayes questions whether individuals today are fully achieving the eight hours for "what we will". Because while one might have a goal of reading more books, spending more time with family, or exercising more often, for many, a significant portion of this time is taken up with activities like (doom)scrolling through social media, checking email, and other distractions that can offer a short-term dopamine hit but can take one's attention away from the task at hand.

In the end, while there have been some legislative efforts to help people get their attention back, particularly for children (e.g., age restrictions for signing up for social media apps or limitations on phone use in schools), Hayes notes that broader efforts would likely face legal challenges (given First Amendment free speech protections). Which could mean that it's ultimately up to members of the public (both individually and collectively) who want to take back their attention to do so by making a conscious decision to limit distractions (perhaps by keeping the phone out of the room when trying to concentrate or using a time blocking strategy to set dedicated time for key tasks) in order to be more productive at work and more satisfying free time away from it?

How To Implement A Weekend Digital Intermittent Fast

(Philip Pearlman | Prime Cuts Newsletter)

The weekend is meant to be a time of relaxation and personal productivity, but potential distractions abound, particularly from one's smartphone. Nonetheless, given that there likely are fewer 'required' reasons to have a smartphone on hand at all times over the weekend, spending time without it could be a way to minimize distractions and have more time to engage deeply in meaningful activities.

To achieve this, Pearlman has implemented a "digital intermittent fast" (similar to a food-based intermittent fast, where one only eats during a certain set of hours) over his weekends. On Friday evening (or Thursday, to make it a long weekend), he signs out of all of his social media apps on his phone and turns off all notifications. Before bed, he puts the phone in a drawer (not located in his bedroom) and leaves it there until the morning (repeating this process on subsequent nights). During the daytime, he uses text messages and email as needed (e.g., to coordinate gatherings with friends) but avoids other functions and, when not in use, puts the phone back in the designated drawer (or leaves it in the car if he leaves home). Then, on Monday morning, he restores the phone back to its full functionality, but considers how he felt over the weekend without it (often a sense of relief that he was able to be less distracted).

Ultimately, the key point is that while a smartphone is an important tool for navigating modern life, having it within arm's reach (and having all of its functions available) might not be necessary at all times. Which suggests that spending time away from it (and making it harder to access key apps that lead to distraction) could lead to better focus and more meaningful weekends!

Mindfully Listening To Each Other

(Derek Hagen | Meaningful Money)

Conversations are two-way streets, with each participant offering contributions and listening to what their counterpart has to say. Nevertheless, the two sides of this equation are not always equal in difficulty, as while most people don't have a hard time stating their opinions, there are many distractions that can take away from one's ability to truly listen to what the other person has to say.

Some conversational distractions are obvious, such as when one person is using their smartphone while ostensibly 'listening' to their counterpart. However, other, more subtle distractions can still challenge one's ability to truly hear what their counterpart is saying (and can prevent their partner from feeling 'heard' in the process). For instance, one's mind might wander elsewhere during an extended comment from a conversational partner (e.g., "What should we have for dinner tonight…oh wait, what are we talking about?"). Another common distraction is formulating one will respond to their partner's comment while they're still making it (guilty!). In both of these cases, recognizing that one's mind is wandering and gently bringing it back to the conversation (and the person) at hand can help lead to better understanding the point the other person is trying to get across and, ultimately, better conversations.

In sum, while it's easy to get distracted when talking with someone else, being mindful about truly paying attention to a conversational partner (and not focusing on ways to make a pithy comment or win an argument) can create a more productive and meaningful experience for both sides, whether talking with a spouse, friend, or financial planning client!

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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.