As expected, after a year in which financial markets generally declined, investors’ focus has turned from accumulating new wealth to protecting what they already have. Although risk management is essential to wealth preservation, tax planning is sometimes disregarded despite its potential to help customers keep more of their hard-earned money.
When clients realize their financial advisers do much more for them than choose winners, they tend to stick with them. To strengthen connections with current customers and attract new ones, it’s essential to inform them of the complete scope of services you offer, which includes complex tax planning tactics
Here are some tips to help you improve your current tax strategy. You might already be doing many of these things; if so, use this as a checklist to see if you’ve covered all the bases and are using all the best practices or if there are any places where you can make some adjustments.
Whether the markets recover in 2023 or a new recession creates even more obstacles, growing your business and showing clients the value you can bring them will be advantageous. When the economy and stock market are down, it can help you see the silver lining.
1. Cultivate deeper bonds with first-rate accountants.
You may already have a network of tax experts in your address book that can help your clients file their returns and minimize their tax liability. Nevertheless, how closely knit are these partnerships? Your relationships with your accountants are likely less intense than they may be if they do not often result in mutual referrals. Get in touch with the best and brightest tax experts you can find. Do they provide cutting-edge services to their customers? How long have they been working with affluent customers? If you want to give your customers the finest service possible, the answers to these questions help you determine what connections to cultivate.
2. Enhance Your Tax Preparation Software
To what extent do you limit your search for income-harvesting opportunities to the last three months of the year? When do you rely on databases or manual tasks to determine who they are? If that’s the case, consider teaming up with other businesses in the tech industry to automate the tax-loss harvesting process for you and your customers. Discover tax savings options throughout the year and execute them, so they don’t drain your resources or waste your employees’ time.
3. Inform customers of new tax-planning options
Tax law is constantly evolving, but in recent years, more significant changes have occurred. Hence, keep your clients in the loop with consistent, jargon-free emails that outline the changes. Provide information on the Safe Act 2.0 passed at the end of last year through various mediums such as email, newsletters, short videos, and blog posts. The bill allows for the conversion of excess money in a 529 college savings plan to a Roth IRA for the account’s beneficiary and increases the minimum age for RMDs from IRAs and retirement plans.
These kinds of communications will help your clients make the most of the new regulations and signal that you are keeping an eye on legislative and regulatory developments with an eye on how your clients may use them to their benefit. Do your affluent customers know the increased federal estate tax threshold will expire in 2025 unless Congress extends it? Also, estate tools like Spousal Lifetime Access Trusts (SLATs) can help couples keep their more extensive estate tax exemption. Informing customers of these developments shows that you care about them and are taking action on their behalf.
4. Broaden the scope of your tax strategy
Among the most robust investment options for minimizing clients’ tax liability are income retirement, college savings programs, and municipal bonds. Nonetheless, consumers should know that your tax planning suggestions are more comprehensive than these basics. For instance, clients with high-deductible health insurance policies can profit from HSAs to prepare for their medical expenses, particularly in old age.
