Key Q4 Tax Conversations for Advisors


Advisorpedia recently reported on the gaps between services expected and services received with advisors’ clients. Among the broadest gaps? Tax planning advice. Even though 92% expected assistance with tax planning, only 25% reported receiving it.

For many households, especially high-net-worth families, taxes are the single largest expense on an annual basis. The challenge is that it’s rare to find CPAs who are as equally interested in next year’s taxes as last year’s taxes. The advisor is generally the one guiding the decisions that shape next year’s taxes.

Webinar: Year End Tax Planning || Key Client Conversations


A 4th Quarter Emphasis on Tax Planning

Our recent webinar guest Ben Birken of Holistiplan said, “Taxes are like the ivy of financial planning. They find their way into nearly every decision your clients make.” Like other areas of your approach to planning, you can deliver more value to your clients by taking a proactive approach.

We see a spectrum here. On the one end, many advisors never interact with a client’s tax return in a meaningful way. One step beyond that – some advisors will review a tax return, but they may not go beyond highlighting a few lines to explain.

The approach we advocate for is proactive, emphasizing advisor-initiated conversations in the fourth quarter. We want to identify the opportunities to improve a client’s tax liability before year-end, not wait for their report card. Critically, we also leverage the right technology so that we can show our clients the impact of their potential decisions, not just explain them.


Leveraging Holistiplan for Tax Forecasting

One of the reasons that we see fewer advisors in the proactive camp is the time-consuming nature of tax planning. Advisors aren’t eager to be flipping page by page through every client’s tax return (and they shouldn’t be).

At WealthPlan Group, it’s why we partnered with Holistiplan to help our advisors with tax planning. Holistiplan uses secure OCR technology to read a return (in seconds) and create a white-labeled report of key variables affecting their tax liability.

Most significantly, Holistiplan also allows advisors to run side-by-side projections of what impact Q4 decisions would have on next year’s tax bracket. You can spend less time explaining the technical side of jargon like Roth conversions, and instead, you can show the impact. Show, not tell, is a tremendous ability for advisors.


Tax Questions to Focus On

We’ll wrap up with the list of key tax conversations we reviewed in our Q4 Tax Planning webinar. Feel free to use this list to initiate conversations with your clients and deliver more value as their advisor.

You can view our webinar here if you’d like to listen to the full list. This list begins around 22 minutes.

Roth Conversions

Roth Conversions are an increasingly common term, but many clients still aren’t sure what it is and, more importantly, if it’s the right decision for them. Here are a few of the key questions we recommend discussing:

  • Do we anticipate your retirement tax bracket being higher or lower than this year’s tax bracket?
  • Are there upcoming changes in tax brackets and deductions that we are anticipating?
  • Does it make sense to start tax free growth now maintaining tax deferred growth?

Qualified Charitable Distributions (QCDs)

For clients who are north of 70.5 years old and are charitably inclined, QCDs are an important conversation. Many clients don’t realize that if you’re only taking the standard deduction and giving charitably, there’s no tax impact since it’s not going above the standard deduction.

For QCDs, it does not register as income, maximizing its tax impact. It can be used to offset your required minimum distribution (RMD). You can also help manage your future RMD’s by managing the account balance.

Donor Advised Funds

Donor advised funds have grown in popularity because of how they allow for creative charitable giving. In addition to bunching charitable giving into one year for tax purposes, a few other benefits might include:

  1. Administratively easier to manage
  2. Clients can donate complex assets
  3. Can also donate appreciated stocks
  4. Donations can be made anonymously
  5. Unique opportunity for multi-generational giving legacies

Gain and Loss Harvesting

This is one of the primary areas an advisor can make an impact in taxes that a CPA wouldn’t investigate. This strategy depends heavily on current capital gains tax rates and what you anticipate they will become in the future.

Last Minute Max Outs (401k, 403b, 529, etc)

This is a common discussion for advisors, but we advocate for using Holstiplan’s tax projection tool to show how different decisions affect your clients’ tax liability.

Shifting Income and Accelerating Business Expenses

Specifically for business owners, there might be a small gap between their current tax liability and the next benchmark lower. By identifying how close your client may be to the threshold, you may consider advising them to shift their income or accelerate large business expenses as appropriate to lower their tax liability.


Watch: Master Guide to Q4 Client Conversations

Our conversation with Ben Birken of Holistiplan is available for on-demand viewing. It is a deep conversation into the topic, and if you’re looking for guidance on improving your tax planning delivery, this is where we would start.

If you want to learn more about our partnership with Holistiplan, you can contact us here.

Webinar: Year End Tax Planning || Key Client Conversations

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