Taxes are a critical element of financial literacy but can be easily sidelined or overlooked in conversations between advisors and clients. To address this issue, Docupace hosted a special webinar featuring Torie Happe, Head of Partnerships at Holistiplan, and Docupace CMO Ryan George to discuss how advisors can turn talk about tax returns into valuable and engaging conversations with clients. Here are some of the highlights.
Addressing Tax Concerns Year Round
When seeking out a financial advisor, clients usually look for two things: 1) someone who can make complex information easy to understand and 2) someone who will keep their tax returns in mind. Research shows that a majority of clients not only want better advice and strategy on how to lower their taxes throughout the year but also a more seamless integration between their investments and tax returns overall.
Advisors, on the other hand, repeatedly fail to meet these demands. As George points out, 92% of clients today expect to receive tax planning advice to some degree when meeting with their advisors. In reality, however, only 25% actually receive it.
Luckily, organizations like Holistiplan are making an effort to close this gap. Happe describes Holistiplan as a “cheat code” that streamlines the tax planning process by pulling raw data from clients’ 1040 and making it more digestible. This gives advisors a baseline for developing a plan year round instead of only during tax season.
“We have to get out of this mindset that it’s just an April and October conversation,” Happe says. “It’s not something that just happens once a year. These are constant conversations that the clients are having inside their homes, and so that should also be a conversation that you’re having while you’re doing their financial plan.”
Keeping Taxes at the Forefront of Investment Decisions with Holistiplan
Technology has an increasingly significant role to play in the world of finances, especially when it comes to tax planning. According to an Oracle survey, clients today expect most financial service tasks — such as executing transactions, onboarding clients, attracting new customers, and providing insights into market events — to be handled through automated technology systems rather than face-to-face interactions.
George points out that, surprisingly, the only element in the survey that customers preferred interacting with an actual person for was the analysis and advice itself. This finding shows that the need for advisors to continue providing quality tax planning and guidance is still in demand. Tools like Holistiplan can help make this process more consistent and accurate.
Once a client’s data is imported into Holistiplan’s system, Happe explains that advisors can use the platform to build out financial scenarios for the client while also identifying where their next tax cliff will be. In this way, she describes Holistiplan as more of a planning tool than a tech tool. However, the “smart” tech built into Holistiplan’s programming offers key benefits to financial advisors who may need extra help in factoring in an investment’s impact on a client’s tax status.
Keeping the Broader Financial Picture in Mind
As financial portfolios become more complex and investment opportunities increase, advisors are beginning to change their approach to planning by looking at clients’ entire financial picture rather than only one aspect. This change has created a trend towards “holistic” or comprehensive financial planning services offered by many modern advisors. And it begs the question, how holistic are these advisors if they fail to offer tax advice?
This is a question George posits in response to his research on current financial trends. He notes that among other holistic topics like intra-family loans and mortgages, guidance on how to convert a traditional IRA to a Roth IRA should be another service on advisors’ menu this tax season.
Happe took this opportunity to highlight Holistiplan’s newest feature — Roth conversion analysis — which was designed specifically for this purpose. The tool provides clients with a customized report that explains what a Roth conversion is, what it means for them, and how it will impact their tax planning moving forward. Overall, this is just the latest tool in Holistiplan’s arsenal of tech support for financial advisors. Tax season will never be the same again.
