On the heels of the 2015 tax season, we fielded our second annual tax-aware Financial Professional Outlook
survey from early to mid-May. Given the timing, we thought a lot of advisors would be talking about taxes
with their clients. But that was not the case.
Only 22% of advisors said taxes were one of their top conversation topics
this year versus 29% in 2014. Advisors also said that 14% of investors wanted to discuss taxes in 2015. That’s up four points from just 10% last year. We believe advisors are missing opportunities here.
Over the last several quarters, the consulting team has seen some advisors have very good success by engaging clients in tax-aware conversations
. I have to believe that’s because the most efficient way to manage taxes is to consider the client’s whole portfolio. And this idea is really resonating with advisors.
With this knowledge, tax-savvy advisors may often be able to uncover client assets they did not know existed. Some may even uncover new clients. Many advisors we work with gain referrals from their happy tax-managed clients
who share their positive experiences with friends and family.
74% of advisors claim to be active in the taxable space
Given that nearly three quarters of advisors (74%) are working with clients in taxable accounts, it seems that the tax conversations should rank higher
than they do. That’s interesting because with many funds reporting increased distributions, the opportunity is only getting bigger. So what should advisors do to generate more interest among their clients?
The bottom line
Advisors need to take a more proactive stance on taxes. By having serious discussions with clients who could benefit from tax-managed solutions, advisors stand to reinforce their own value while potentially maximizing their clients’ after-tax wealth. For the advisor who can do this well, new business is likely to follow.