Episode from the podcastThe Perfect RIA

Let’s Talk About Taxes! [Episode 23]

Released Friday, 12th April 2019
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Matthew and Micah are of the opinion that an expertise in tax planning (not preparation as is accentuated in the episode) is an essential base of knowledge to cultivate for all financial advisers.
As they both elaborate, it would be a case of gross negligence to neglect discussions of taxes with clients. In fact, Micah says that taxes are the biggest expense for any client. So you should invest considerable effort in tax planning.
This begs the question of tax expertise in your own firm. Are you well-versed in the nuances of the tax code? Can you provide the necessary value for clients on the nature of tax planning?
Matt and Micah talk of their own experiences and give advice, represented by these key talking points below.
[#1 Difference Between Tax Preparation and Tax Planning ]
  • Micah stresses that he doesn’t give advice on tax preparation, which involves gathering the necessary documents, etc.
  • He is involved in tax planning, which means that the future is brought into focus, and things are looked at that might affect the taxes of the client. So, it doesn’t hinge on giving tax advice.
  • Matt and Micah share that the role of the tax planner really is about educating compliance officers, CPAs, and the client, about the line between financial planning and tax preparation.
[#2 The Infrequency of Tax Planning in the Industry! ]
  • As our hosts state, it is surprising just how little tax planning is being done for their clients.
  • They state that even though clients may have CPAs and other professionals who are handling taxes, what they’re really handling is the tax preparation side and not the planning side.
  • This means that ultimately clients are spending a lot more money on taxes than need be because no one is doing the necessary planning.
[#3 The Importance of a Client’s Tax Return ]
  • Matthew likens a client’s tax return as an essential tool for checking the heartbeat of a client. That is, he compares it to a doctor checking the blood pressure of a patient, as an introductory measure.
  • And Micah says that a tax return is a quantifiable way of measuring the value you can bring to your client. It’s also key for making tax planning decisions as well.
  • But they stress that you need to know how to read the tax return to a T. That way you can break it down and readily discuss it with clients. And it shows you have a handle of what’s going on. It is very valuable.
  • A warning from Matthew though is to really know your stuff before you jump into tax planning with clients. Also, making sure you work as a team with the tax preparers is essential as well.
Matt and Micah’s Action Items
  1. Go out and get tax returns for all of your clients. If they ask why, just simply tell them how big a role that taxes play in getting the big picture and returning maximum value.
  2. If you are getting the returns, the next step would be studying the tax codes, knowing the new laws inside and out, and actually using the information to return value to your clients in whatever way possible.
  3. Learn how to view a tax return and then communicate that information to clients in an effective manner. It’s one thing to know taxes like the back of your hand, and it’s another to explain it in a clear way to someone who doesn’t.
  4. Incorporate taxes into your prospect process.
  5. Set up a long term tax planning strategy with every client so that you know their future tax implications. Clients love having that safeguard in place.
More details at: http://theperfectria.com/lets-talk-about-taxes/
Produced by Simpler Media

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