Weekend Reading For Financial Planners (April 19–20)

Share of HNW Households Increases, Leading To Greater Client Service Needs: Cerulli

(Michael Fischer | ThinkAdvisor)

As Americans' financial wealth has grown over time, so too has the number of individuals seeking out a relationship with an advisor (to help them manage their growing assets and the financial planning issues that can come with greater wealth). Notably, just as the number of individuals who might be willing and able to pay financial planning fees have increased, so too has the number of households who have advanced up the wealth spectrum, from the 'mass affluent' to the 'High-Net-Worth (HNW)' category and from the HNW to the 'Ultra-High-Net-Worth (UHNW)' category, often leading to greater planning demands from their advisor (and the possibility that they might seek out a new advisor who they think could better meet their changing needs).

According to data from research and consulting from Cerulli Associates, the total financial wealth of all U.S. households exceeded $90 trillion at the end of 2024, up 16% from the end of 2023, buoyed by strong growth in the equity market (though the subsequent market downturn experienced in 2025 likely has dampened these figures). This growth was particularly prominent among HNW households (defined here as those with at least $5 million in financial assets), which were estimated to hold $49 trillion of financial wealth, or 54% of the overall total. This growth was due not only to legacy HNW households increasing their wealth, but also the entry of new families to the HNW bracket, with the total number of HNW households increasing to 3.4 million (including more than 100,000 UHNW households with at least $50 million in financial wealth). The growth of the HNW category has led to slippage among the 'affluent' ($2 million-$5 million) and 'mass affluent' ($500,000-$2 million) categories, which comprised 36% of total households at the end of 2024 (17% and 19%, respectively), down from 38% at the end of the prior year. Cerulli found that for these latter groups, retirement assets remain their largest investment holdings, split largely between IRAs ($16.7 trillion) and defined contribution plans ($11.7 trillion).

As more Americans have moved up the wealth spectrum, thanks in part to equity market gains seen during the past couple of years, the pool of prospective financial planning clients likely has increased as well, including at the higher end of the wealth spectrum (and while the recent downturn in equities likely has dampened some of this growth, it could serve as a catalyst for some wealthy households to recognize the benefits of working with an advisor?). Further, given findings from Kitces Research on Advisor Productivity that moving 'upmarket' can boost advisor team productivity, this could be an attractive option for many firms (though it might require adding staffing and services to meet the planning needs of these clients?).

40% Of Advisory Clients Would Switch To An Advisor Offering Estate Planning Services: Survey

(David Lenok | WealthManagement)

While, in previous decades, some financial advisors might have primarily focused on investment management, consumers appear to be increasingly demanding a more comprehensive planning experience. One area in particular that appears to be gaining in interest is estate planning, with advisors well-positioned to help clients achieve their legacy goals, find opportunities for greater tax efficiency, and interface with clients' estate planning attorneys to produce the best possible outcome.

According to a survey conducted by online estate planning platform Trust & Will, 40% of financial advisory clients would switch to an advisor who offered estate planning services. This was particularly true for those at higher income levels, with 82% of those earning between $500,000 and $999,000 indicating they would be willing to switch advisors. Overall, 70% of the total survey audience (which included both advisory clients and those without an advisor) said they believe financial advisors should offer estate planning services, either as a core service (37%) or as a valuable add-on (33%). This figure also varied by income, with 55% of those earning more than $500,000 saying estate planning should be included as a core part of financial planning, compared to only 28% of those earning less than $25,000.

Notably, though, "doing" estate planning means different things to different people. When asked about the roles for a financial advisor in estate planning, the top response was help with specific tasks like beneficiary designations or tax strategies (41%), followed by education on estate planning basics (37%), which fits well within the domain of what financial planners typically do as part of the financial planning process. In turn, only 35% of those surveyed would want an advisor to offer a full suite of estate planning services, including document drafting, a domain that most advisors accomplish by building relationships with local "Centers Of Influence" like estate planning attorneys. Though recent Kitces Research on Advisor Productivity shows 19% of advisory firms are providing such services 'in-house' (albeit most commonly through an outsourced document provider like Trust & Will, Wealth.com, or EncorEstate).

Altogether, this survey validates the relevance of estate planning as a core domain of financial planning, and that there is growing appetite among many current and prospective financial planning clients for estate document preparation (with 35% interested and 'only' 19% of advisors currently providing). Though it's fair to recognize that the purveyor of the consumer survey is itself one of the providers of outsourced estate document preparation for financial advisors in the first place. Still, though, as estate tax exemptions have risen for the past 20+ years, estate planning has become less and less about estate tax planning, and more about making sure that clients simply have proper estate planning documents in place to begin with… which opens the door for at least some to make estate planning (including preparing estate documents) a focus area to go deep into (perhaps serving as a differentiator for their practice), a question that could be influenced by the relative estate planning needs of their ideal target client?

RIA M&A Sets Q1 Record Despite Market Woes: DeVoe

(Sam Bojarski | Citywire RIA)

The number of RIA Merger and Acquisition (M&A) deals reached a record-high of 272 in 2024, according to RIA M&A consultancy DeVoe & Company, with many Private Equity (PE)-backed buyers scooping up smaller firms (accounting for 72% of all transactions) and acquirors benefiting from a cooling of interest rates. Nonetheless, entering 2025, questions remained as to whether this brisk pace would continue, particularly as firms started facing headwinds from the equity market in the latter half of the quarter.

According to data from DeVoe, M&A drivers appeared to outweigh any concerns to start 2025, as the first quarter saw 75 transactions (involving at least $100 million of AUM), surpassing the previous first-quarter record of 68 deals, set in 2022. While PE-backed firms continue to dominate demand for deals, the motivations of sellers appear to be shifting. Whereas RIA founders might have previously looked to a deal for succession purposes as they near retirement, growth opportunities have overtaken this factor as the primary driver of demand, with many smaller RIAs (perhaps struggling with organic growth on their own) looking to join larger firms that can offer scale, advanced technology, and robust operational support.

In sum, RIA M&A activity appears to be continuing at a robust pace, with interest from both buyers looking to continue to scale and sellers interested in growing within a larger firm, alongside traditional succession- and liquidity-related drivers (though internal succession appears to remain a viable option in the current environment as well). Nonetheless, it remains to be seen what impact more recent market turmoil, including a volatile interest rate environment that could impact financing, might have on deal flow during the second quarter and the remainder of 2025.

What Is The Optimal Rebalancing Strategy?

(Jennifer Lea Reed | Financial Advisor)

Financial advisors often view rebalancing as a valuable tactic in ongoing portfolio management, both to ensure that the overall risk of the portfolio doesn't drift higher (as risky investments can out-compound the conservative ones in the long run), and to potentially take advantage of sell-high buy-low opportunities. A caveat, though, is that it's not entirely clear how often a portfolio should be rebalanced in order to achieve these goals.

A recent report sponsored by YCharts aims to address this question, analyzing portfolio performance (for a model 60/40 portfolio with U.S. and international exposures) using data from 1996-2024 across four potential rebalancing strategies: quarterly rebalancing, annual rebalancing, rebalancing when the portfolio has 'drifted' 10% above or below its target allocation, and never rebalancing. In terms of raw returns, the 'Never Rebalance' strategy provided the strongest annualized returns over the period at 7.14%, followed by the 'drift' strategy at 6.91%, annual rebalancing at 6.77%, and quarterly rebalancing at 6.70%. Further, the 'no rebalance' strategy also offered other benefits (e.g., time requirements to implement, transaction costs, and potential capital gains tax exposures) by not rebalancing compared to the other strategies (which saw 115 quarterly rebalances, 29 annual rebalances, and 8 'drift' rebalances over the period studied). At the same time, performance across the strategies varied by market environment, with the 'no rebalance' strategy typically performing best in the bull markets (as the strategy lets winning positions 'ride') and more frequent rebalancing strategies performing better during the bear markets that occurred during the period studied (in part because the 'no rebalance' strategy was overweight riskier assets that had performed better in the bull market leading up to it).

In the end, while the 'no rebalance' strategy performed well overall in this study, the 'best' strategy for a given client is likely to depend on their circumstances. For instance, an advisor working with an 'accumulator' client might be able to rebalance the portfolio using additional capital contributions (avoiding the need to sell assets and potentially realize capital gains), while those working with clients nearing and in retirement might take a more active rebalancing approach to avoid major drawdowns and sequence of return risk. Which suggests that advisors can add value not only in executing portfolio rebalances when needed, but also in deciding whether and how to implement a rebalancing strategy in the first place!

Examining The Conventional Wisdom Around Portfolio Rebalancing

(Robert Huebscher | Robert's Substack)

Both financial advisors and consumers alike are likely familiar with the concept of portfolio rebalancing, or returning the portfolio to a desired asset allocation, whether over defined periods (e.g., quarterly or annually) or based on tolerance thresholds (e.g., when an asset class drifts 15% from its target allocation). Rebalancing is often thought of as a prudent strategy that could boost returns (e.g., by increasing allocations to assets that have lagged, anticipating reversion of its returns in the following period) and reduce portfolio risk (e.g., by ensuring that no asset class becomes too overweight in the portfolio).

Nonetheless, citing research using real-world and hypothetical performance data, Huebscher calls this 'conventional wisdom' into question. First, he finds that rebalancing doesn't result in an unambiguous performance 'bonus', as while rebalancing produced a higher return than buy-and-hold in about two-thirds of the scenarios studied, buy-and-hold outperformed by a larger margin in the scenarios where it had better returns (and these returns were before taking into account transaction costs and potential capital gains tax exposures that rebalancing can generate). In terms of risk management, he concludes that there is a negligible difference in risk-adjusted return between rebalancing and buy-and-hold, regardless of rebalancing frequency. And while a buy-and-hold strategy increases volatility as measured by the standard deviation of returns, he suggests this might not be an appropriate risk measure for clients with a long time horizon (and the standard deviation includes upside volatility as well).

Altogether, Huebscher concludes that while the purported performance-enhancing and risk-mitigating benefits of rebalancing might be overrated, rebalancing can still offer benefits in certain client situations, whether to align a client's portfolio to their risk tolerance (and capacity) or as part of a broader asset allocation change (to a lower-risk portfolio) when clients have accumulated sufficient assets to support their lifestyle needs. Which ultimately suggests that advisors can add value by gaining a deep understanding of their client's ability (and need) to handle risk and implementing an appropriate rebalancing strategy accordingly (perhaps using tolerance bands, which can lead to fewer rebalances and less portfolio turnover than time interval-based strategies).

How Advisors Can Assist Clients In Rebalancing Their Portfolio Over Time

(Thomas Young | Advisor Perspectives)

In the current volatile market environment, many nervous clients might look to their advisor as a steady presence and a source of strategies that will help them remain on track to achieve their financial goals. One potential opportunity for advisors in this situation is to follow through with a portfolio rebalancing strategy (given the potential change in a client's portfolio composition given market volatility), which can give clients greater confidence that their portfolio will be aligned in a way to meet their needs without taking more drastic action (e.g., selling out of a particular asset class).

Choosing a rebalancing strategy can start with an analysis of a client's unique situation. From a financial perspective, rebalancing might be particularly appropriate for a client nearing or in retirement (for whom sequence of return risk is a greater factor), or who otherwise has a low capacity or tolerance for risk. For instance, a recent report by Rajiv Rabello found that while engaging in portfolio rebalancing can increase the percentage of successful scenarios for individuals entering retirement who have aggressive withdrawal needs, clients with moderate withdrawal needs could increase after-tax wealth passed on to beneficiaries by instead prioritizing withdrawals from the bond portion of their portfolio with minimal impact on their success rate. In addition, Young suggests that regular rebalances (perhaps quarterly) could be appropriate for clients who insist on regularly following the market and checking their portfolio (giving them a scheduled time to rebalance the portfolio, reducing the temptation to want to make more frequent portfolio changes). And when executing rebalances, advisors can consider tax-loss harvesting opportunities (in certain circumstances), which can potentially further reduce the psychological toll on clients of navigating through a market downturn.

Ultimately, the key point is that while portfolio rebalancing might not lead to greater overall returns, it can offer clients a variety of benefits depending on their circumstances, from enhancing risk management to deterring emotionally charged trades. Which suggests that it can be a valuable part of an advisor's toolkit, particularly during periods of market volatility when clients might look to their advisor for reassurance that they remain on track to meet their financial goals.

Helping Clients Evaluate The Decision Of Whether To Pay Off Their Mortgage Early

(Christine Benz | Morningstar)

Over the life of a mortgage, homeowners (and their financial advisors) face a key question: simply make the scheduled payments and pay down the loan over its term (perhaps 15 or 30 years), or make additional principal payments along the way, which can lead to paying off the loan earlier and reduced interest costs along the way but sacrifice the ability to make additional contributions to investment accounts.

Advisors might be tempted to first look at the 'mathematical' side of the decision, helping their clients crunch the numbers on whether it might make more sense to pay down their mortgage early or to add to investment accounts. Today, this calculation could look quite different depending on when the client obtained (or refinanced) their mortgage, as those who did so before the recent run-up in interest rates might have mortgage rates below the 'risk-free' rate they could receive through savings products or government bonds (making mortgage paydown less attractive), while those with more recent mortgages could have rates that far exceed the 'risk-free' rate available to them (and even rival expected long-term returns of stocks, which are significantly riskier than the 'guaranteed' return available from paying down a mortgage!). Advisors can also incorporate the tax implications of the mortgage paydown versus investment question, including whether and how much mortgage interest the client actually stands to be able to deduct in the post-Tax Cuts and Jobs Act environment.

Nonetheless, for some clients, the decision of whether to pay down a mortgage early is just as much psychological as it is mathematical. For instance, clients nearing and in retirement might prefer to reduce their fixed expenses by eliminating their monthly mortgage payments (though they'll still be on the hook for any property taxes and maintenance costs). Which suggests that advisors can add value for clients facing the mortgage paydown decision not only by crunching the numbers behind this decision, but also by being open to taking into account client preferences when it comes to this major life choice!

Should Clients Ever Put More Than 20% Down On A Home?

(Nick Maggiulli | Of Dollars And Data)

When purchasing a home, many buyers look to make a 20% down payment, which can offer the prospect of better loan terms, allow them to avoid paying Private Mortgage Insurance (PMI) premiums, and maintain positive equity in the home after the purchase is complete. However, 20% is by no means the maximum down payment a homebuyer might make, leading to the question of whether making a larger down payment upfront might be advantageous.

From a dollars-and-cents perspective, putting up a larger down payment means that the overall loan size, monthly payment, and total interest costs will be smaller, which could add up to significant savings over the life of the loan (and might be particularly attractive for homebuyers today, as mortgage rates are significantly elevated to where they were just a few years ago and likely exceed the "risk-free" return clients could achieve). Nonetheless, there is an opportunity cost to putting up a larger down payment in the form of reduced liquidity. While a homeowner could potentially tap into their home equity for liquidity needs if necessary (e.g., using a home equity line of credit, if available), certain clients (perhaps including those with less stable job situations) might prefer to have additional cash available (even if the return on cash is less than the interest rate on their mortgage). Given these dueling priorities, some clients might instead choose to put down 20% but make extra principal payments on an ongoing basis, preserving their liquid assets while gaining the interest savings that come from reducing the mortgage balance.

In sum, when working with a client making a home purchase, financial advisors can add value by providing them with a range of down payment options and the financial implications of each, giving the clients the opportunity to make the choice that best fits their financial and flexibility needs (and being on the lookout in the future for refinancing opportunities that could further reduce their mortgage burden)!

Why Is It Risky To Buy Stocks On Margin But Prudent To Buy Them "On Mortgage"?

(Nerd's Eye View)

One of the most common questions financial advisors receive from clients is whether the client would be better off using excess cash flow to pay down (or pay off) their mortgage or contribute to investment accounts. Notably, holding onto a mortgage while using excess cash to invest is not dissimilar to using a margin loan to increase investment exposure. Those who take this route of investing 'on mortgage' (rather than 'on margin') are making a bet that they can receive a greater rate of return from their investments than the continued cost of holding a loan (interestingly, while many homeowners make this bet, many would be uncomfortable taking out a home equity line of credit to fund their investments!).

For example, imagine 3 clients, A, B, and C. Client A has a $500,000 residence with a $500,000 fixed-rate 30-year mortgage at 5.0%, and a $1,000,000 conservative portfolio with a beta of 0.5. Client B has a $500,000 residence with no mortgage, and a $1,000,000 conservative portfolio with a beta of 0.5 that is collateral for a $500,000 variable-rate margin loan with a 5.0% interest rate. Client C has a $500,000 residence with no mortgage and a $500,000 aggressive all-equity portfolio with a beta of 1.0. While one might assume that Client A faced the least risk (given their more conservative portfolio and lack of margin), it turns out that all three clients have the exact same exposure to market volatility, as, for example, a 10% market decline would lead to a $50,000 drop in net worth for all three clients. It might be surprising for clients (and advisors alike) that a mortgage loan - typically viewed as a conservative route of using "good" debt - and a margin loan - typically viewed as a risky route of using "bad" debt - yield substantively identical results.

In the end, from the perspective of the client's entire financial balance sheet, buying stocks "on mortgage" is remarkably comparable to the risk of buying stocks on margin. Which suggests that clients who understand the implicit risk involved with mortgage debt and leverage might intuitively have a drive to pay down their mortgages quickly (particularly if they have a mortgage rate that that significantly exceeds the current 'risk-free' rate of return).

The Disease Of More

(Life After The Daily Grind)

The world has experienced countless technological innovations during the past century, from the rise of computers to the introduction of the Internet, to, today, the emergence of Artificial Intelligence tools. Which have allowed humans to experience 'more' of just about anything, from finding out the latest news with just a few swipes on a smartphone (or even without taking any action, when it comes to cell phone notifications) to being able to communicate with anyone in the world instantly, whether by email, text, or video call.

In such a world of abundance, one might assume that individuals might be able to save a significant amount of time and use it for more enjoyable activities. However, the modern age instead appears to reflect the "Jevons paradox", where technological advancements that increase the efficiency of a certain resource can paradoxically lead to an increase (rather than a decrease, which might otherwise be expected) in its usage. For instance, email is a much more efficient form of communication than writing (and mailing) a letter by hand. However, its availability appears to have led individuals not to spend less time composing messages, but rather sending more communications overall (as many advisors' inboxes can attest to!). Similarly, while an individual might have had to wade through an entire newspaper to be aware of the news of the day (which itself was an upgrade from news previously spread through town criers and word of mouth), one can see news around the world quickly via a variety of websites. Nevertheless, rather than leading to a reduction in the time spent following news, many individuals end up spending more time following the news as they track the latest updates across a range of topics and publications. Also, despite the sheer number of products and services available today, individuals often suffer from the so-called "paradox of choice", where an excessive array of choices debilitating to decision-making ("What if I pick the wrong one?") and ultimately lead to less satisfaction about the choice that is eventually made. Finally, at a time when technology has made work easier, chronic 'busyness' remains a problem as individuals fill any time that might be saved with additional tasks (which some research suggests can detract from happiness, even if an individual earns more as a result!).

In sum, while the modern era has no doubt brought great abundance, it's up to individuals to decide whether to use it to always pursue 'more' or, perhaps, to win back time and mental capacity for more enjoyable (and productive?) activities instead?

"Outcome Orientation" As A Cure For Information Overload

(Cedric Chin | Commoncog)

In the digital age, there is no shortage of sources of information, from news websites and apps to social media feeds that (purposefully) provide an infinite feed of content to consume. To help combat the 'information overload' that can come from exposure to such a wide range of media, one option might be to engage in an 'information diet', carefully curating the sources of information that are vying for your attention (e.g., by deleting certain apps).

Nonetheless, because even such an 'information diet' can still lead to significant time spent on news and media consumption, Chin suggests an alternate approach he calls "outcome orientation". With this approach, anytime you are doing or reading something, you take a moment to ask yourself, "What is the outcome I am trying to achieve here?". Sometimes, you might find that this question has a clear answer ("I'm reading this recipe because I plan to use it for dinner tomorrow night") and continue with the activity. But on other occasions you might realize that there is no defined outcome for what you're doing ("I'm 10 pages into this comment section and forgot what the original article was about!"). Notably, using the "outcome orientation" technique could be used to enhance an "information diet", first by filtering down the media to which you're exposed and then deciding whether certain articles, posts, or podcasts, actually merit your attention and are aligned with a desired outcome.

Ultimately, the key point is in the war for attention that is being constantly waged between content creators and the broader public, coming to the battle with techniques that can help you not only filter down the available content, but also pay attention to only the material that is truly impactful can help you save both time and mental capacity (and avoid coming up for air saying "What did I do for the past hour?!").

What Is The Point Of Financial Freedom If We Never Feel Free?

(Rick Foerster | The Way Of Work)

'Financial independence' is often thought of as a spectrum that runs from complete 'dependence' (e.g., a child relying on their parents for financial support) to complete independence (e.g., having enough financial resources to no longer have to work again to meet one's needs). Many people seek this latter goal, whether in the form of traditional retirement, or, for some (e.g., followers of the Financial Independence, Retire Early [FIRE] movement), retirement much earlier.

While it might be surprising to those who live paycheck-to-paycheck, those who achieve financial freedom are not guaranteed happiness. This is sometimes because, despite their resources suggesting otherwise, those who are financially free don't necessarily have "psychological independence" from thinking about money. Some individuals, despite not needing more wealth to meet their needs, might chase greater net worth figures to keep up with peers. Others might worry that their wealth could disappear and therefore they need to keep putting the pedal to the metal at work. Still others might have tied their identities so closely to their work that they no longer feel a sense of purpose or self once they retire.

Which suggests that financial advisors can play an important role in supporting clients who have reached financial freedom, not only in ensuring that their asset allocation matches their financial goals, but also in helping them understand the challenges that come with retirement and explore the potential paths available to them (perhaps before they actually make the jump to retire?).

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We hope you enjoyed the reading! Please leave a comment below to share your thoughts, or send an email to [email protected] if there is an article you'd like to recommend 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.