The Long View

Tom Idzorek and Paul Kaplan: How to Make Lifetime Financial Advice Work for Clients

Dec 3, 2024

This week’s guests are Tom Idzorek, Chief Investment Officer of Retirement at Morningstar, and Paul Kaplan, former Director of Research for Morningstar Canada. They delve into their new book on lifetime financial advice. Topics include personalized financial strategies that integrate human capital, the importance of flexible planning through life changes, and maximizing tax efficiency in investing. They also discuss the role of insurance in managing financial risks throughout life, offering listeners insightful guidance for effective financial planning.

50:15

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Episode guests

Paul Kaplan

Tom Idzorek

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Episode notes

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Quick takeaways

The holistic life cycle finance approach integrates human capital with traditional financial planning, enabling personalized strategies that enhance rational decision-making for clients.

Emerging technologies, particularly artificial intelligence, are transforming financial planning by improving the assessment and communication of complex concepts related to human capital.

Deep dives

Lifetime Financial Advice Concept

Lifetime financial advice is rooted in life cycle finance, which synthesizes insights from renowned economists such as Milton Friedman and Franco Modigliani. This approach provides a holistic, rational framework for financial planning that contrasts with traditional methods, which often employ disjointed rules for spending and asset allocation. By integrating financial planning and investment management, this model empowers financial planners to act as behavioral coaches, guiding clients toward more rational, cohesive financial decisions. Emphasizing the importance of seeing the entire financial picture, this model aims to achieve optimal outcomes for clients across different life stages.

Intro

2min

Tailored Lifetime Financial Guidance

22min

Navigating Financial Planning Through Life Changes

5min

Maximizing Tax Efficiency in Investing

8min

Navigating Life Stages with Insurance

8min

Farewell to a Legacy

6min

Our guests this week are Tom Idzorek and Paul Kaplan. This is Tom’s second appearance as a guest and Paul’s first. Tom is chief investment officer of retirement for Morningstar Investment Management. He also serves as a member of Morningstar’s 401(k) Committee, Public Policy Council, Global Investment Committee, US Investment Policy Committee, and the Editorial Board of Morningstar Magazine. Before retiring in 2023, Paul was director of research for Morningstar Canada and a senior member of Morningstar’s Global Research Team. He led the development of many of the quantitative methodologies behind Morningstar’s fund analysis, indexes, advisor tools, and other services. Tom and Paul are accomplished researchers and authors, having individually published or collaborated on numerous academic papers, accepted to prestigious peer-reviewed journals, and their work has received numerous awards through the years. In today’s interview, we’re focusing on one of their recent collaborations, their new book, Lifetime Financial Advice: A Personalized Optimal Multilevel Approach.

Background

Tom Idzorek Bio

“Tom Idzorek: Exploring the Role of Human and Financial Capital in Retirement Planning,” The Long View podcast, Morningstar.com, June 7, 2022.

Paul Kaplan Bio

Lifetime Financial Advice: A Personalized Optimal Multilevel Approach, by Tom Idzorek and Paul Kaplan

Lifetime Financial Advice

“Joining Lifecycle Models With Mean-Variance Optimization,” by Tom Idzorek and Paul Kaplan, papers.ssrn.com, Oct. 19, 2023.

Lifetime Financial Advice Book Club Series

“Personalized Multiple Account Portfolio Optimization,” by Tom Idzorek, Financial Analysts Journal, June 29, 2023.

“The Popularity Asset Pricing Model,” by Tom Idzorek, Paul Kaplan, and Roger Ibbotson, papers.ssrn.com, Oct. 26, 2021.

“Popularity: A Bridge Between Classical and Behavioral Finance,” by Roger Ibbotson, Tom Idzorek, Paul Kaplan, and James Xiong, Research Foundation, Dec. 10, 2018.

“ESG Investing and the Popularity Asset Pricing Model (PAPM),” by Tom Idzorek, blogs.cfainstitute.org, Feb. 1, 2024.

Other

“Modern Portfolio Theory: What MPT Is and How Investors Use It,” by the Investopedia team, Investopedia.com, Aug. 29, 2023.