The Top 4 Financial Topics You Should Cover with Your Clients This Tax Season

Apr 7th 2015
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In today’s competitive environment, all advisors are vying for “lead dog” status when it comes to winning the hearts and minds of clients. Being viewed as a financial problem solver, not just a tax advisor, keeps you in the primary position as the client’s personal financial CFO if you so desire.

We all know there’s no busier time for accountants than tax season, but my experience tells me that accountants have the opportunity to be viewed as the most trusted advisor for any individual or family – potentially, more trusted than their attorneys or financial planners.

Given that auspicious role, accountants should take advantage of this tax season to help clients deal with financial issues well beyond paying taxes. You can do this in coordination with a client’s financial advisor and/or attorney, and help build a collaborative team where you are seen as proactively addressing their financial needs.

It’s an opportunity you won’t regret. Your clients will view you as not only their tax advisor but also their problem solver for other, critical financial matters. The most common issue I deal with, when working with higher-net-worth clients, is the lack of coordination among the various advisors they place their trust in: their accountant, financial planner, liability insurance professional, life insurance agent, and attorney.

To start, think of your client’s tax return as a “financial biography” which, line by line, provides opportunities for tax-planning and financial-planning strategies. Then as a sole practitioner or in concert with a financial advisor, review these four basic financial issues with your client during tax season.

1. Retirement savings. Does your client even know exactly how much money they will need to retire with, so they will never worry about living longer than their assets?

Is your client contributing the maximum amount to his or her retirement plan at work? If not, should they contribute more? These contributions will not only reduce a client’s current tax liability but also boost retirement savings, which is often the primary financial goal facing most Americans.

Should clients contribute to a Roth individual retirement account (IRA), or do they have the opportunity to contribute to a Roth 401(k) at work? With the potential for higher tax rates in the future, these Roth contributions can be withdrawn tax-free, unlike withdrawals from 401(k) or traditional IRA plans, which are taxed as income.

Should they convert part or all of their traditional IRA into a Roth IRA, which could mean paying more taxes now but less later?

Have clients who own small businesses considered setting up a defined benefit plan? Depending on their age and income, those contributions can top $200,000 per year – about four times the maximum allowed for simplified employee pension IRA contributions.

2. The time to retire. Many people worry they will run out of money in retirement because they haven’t saved enough and don’t have enough assets to turn into cash. This is especially critical for those expecting to retire within the next five or 10 years.

Tax time is a good time to review what retirement-planning strategies clients have adopted already, what other moves they could make, and when they plan on retiring. Should they begin collecting Social Security at their full retirement age – which is 66 for those born between 1943 and 1954 – retire early at 62 and earn 25 percent less, or wait until age 70 and earn 32 percent more?

Married couples have additional choices to optimize Social Security benefits. For example, the spouse with the smaller Social Security payout can collect as much as half of the other spouse’s benefits before claiming his or her own while the other spouse delays payments until age 70. There are also other variations on this theme.

3. Asset protection and estate planning. No matter what their age, clients need to protect assets during their lifetime and afterward for their heirs.

Do they have an umbrella insurance policy to protect assets from seizure in the event of a lawsuit? Are they gifting assets to family members, which is tax-free up to certain limits and will reduce the size of their taxable estates? Have they established a living trust or asset protection trust so that their heirs can avoid probate court, which can delay estate distributions and involves legal fees?

4. Tax-efficient charitable donations. Every accountant knows charitable donations can reduce one’s tax liability, but are your clients using the most tax-efficient methods to make those donations?

If they donate appreciated assets through a donor-advised fund, for example, they can deduct the full market value of those assets and avoid paying capital gains tax. Donors who want more control over donations can use a family foundation instead. In either case, an equivalent cash donation would cost more because it uses after-tax dollars.

After Tax Season
You may not be able to cover all of these key financial issues with clients during tax season, so consider tackling them afterward. If clients have other advisors, such as financial planners and tax attorneys, try to schedule at least one conference call a year with all of them on the line at the same time. When every advisor knows what the other is doing, together, coordination gaps can be addressed.

And if clients are having cognitive issues that affect how they manage their money, reach out to their financial advisor or other family members for help. Clients – and their families – will appreciate their accountant going the extra mile.

About the author:
Paul Saganey is the founder and president of Integrated Financial Partners, which has more than 200 financial advisors operating throughout the United States and more than $4 billion of assets under advisory. He is a CFP-certified advisor with more than 25 years of experience.

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By William Dalton
Jun 25th 2015 20:12 EDT

It is true that, advisory service is 'lead dog' today, keep it mined in
every adviser, whether they win the heart and brain of the clients, they
definitely keep up their business or investment profitable.

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