Weekend Reading for Financial Planners (Oct 30-31)

Weekend Reading for Financial Planners (Oct 30-31)

Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with a (Twitter-based) breakdown of the final text of President Biden’s latest “Build Back Better” Act, which is perhaps more notable from a financial planning perspective for what parts of the previously proposed tax legislation it doesn’t include (forgoing increases to the top marginal ordinary income and capital gains tax rates, restrictions on IRA contributions and Roth conversions for high earners, and reduced estate tax exemptions), than what it does (such as applying new surtaxes to income over $10 million and $25 million, and subjecting S corporation profits to 3.8% Net Investment Income Tax for high earners)… though still more changes could be in store, as Congressional Democrats debate raising or eliminating altogether the State and Local Tax deduction limit as part of the final comprehensive budget bill.

Also in the industry news this week:

  • Democrats introduced the Social Security 2100 Act this week, which would increase Social Security benefits for almost all recipients, while also raising tax revenue by applying FICA taxes to incomes above $400,000, to stave off the projected depletion of the Social Security Trust fund
  • The SEC released a Risk Alert highlighting deficiencies regarding everything from fee calculations to marketing disclosures on various ETFs and mutual funds (albeit mostly smaller ones that are marketed toward and used by retail investors, not advisors)

From there, we have several articles focusing on inflation, including:

  • Why the U.S. is not likely to be facing hyperinflation, despite increased speculation to the contrary as ‘regular’ inflation has ticked higher
  • How today’s economy differs from the high-inflation and low-growth stagflation era of the 1970s
  • An analysis of how stock returns have (or, in practice, really have not) correlated with inflation over time

We also have a number of practice management articles, including:

  • How ‘scope creep’ causes advisors who charge fixed fees to end up doing more work for the same fee (and what to do to avoid it)
  • How client segmentation is often recommended to improve efficiency, but can actually restrict a firm’s growth if there are too many client segments
  • A case study of a financial advisor who charges a moderate ($1,000/year) annual retainer fee to provide ‘factual’ financial education on demand (but not more expensive, personalized advice)

We wrap up with three final articles around the theme of financial advisor business models:

  • How the increased number of functions that TAMPs perform for financial advisors (and the reality that not all TAMPs perform the same functions anymore) may be making the term ‘TAMP’ obsolete
  • Why, despite competition from independent channels and fee-only RIAs, the number of large wirehouse brokers has stayed fairly constant (while their assets under management have actually increased)
  • How the SEC has failed to keep up with the “Great Convergence” of the financial product sales and advice industry, and why it needs to clarify who should be permitted to hold themselves out as a financial advisor

Enjoy the ‘light’ reading!

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