Financial Planning > Tax Planning

Ed Slott on IRAs, taxes and the educated advisor

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As you gear up for the final push on tax season and work with your clients on their tax decisions, we thought it was a great opportunity to talk with IRA guru Ed Slott and find out the opportunities out there for advisors.

Slott spends much of his time on the road bringing his IRA expertise to the people, but we were lucky to find him at home working on his latest book.

The following are highlights from our conversation. For a more detailed account of our discussion, keep a lookout next month for the April issue of Senior Market Advisor.

SMA: What are the opportunities for advisors and IRA rollovers?

SLOTT: Greater than ever. The opportunities are greater than ever. There are more people in transition, and they are the right people. Just look at the demographics. There are 10,000 baby boomers a day hitting retirement age. Also, the other demographic is the economy. When people lose a job, there’s a transition taking place. That’s a big rollover opportunity.

SMA: What about current tax laws?

SLOTT: Good question. In addition to the large demographic of baby boomers, the time to strike is now before any new tax laws take effect. Currently, taxes are historically low. So there is additional opportunity for advisors. But the money is going to be taxed because the government is broken. These low taxes are unsustainable. You have a two-year window before taxes will change. The time is now to take advantage.

SMA: It’s clear the potential is there, but what can advisors do to take advantage of this vast opportunity?

SLOTT: The way to attract this money is to get educated. Big money is available to an educated advisor. But you need special knowledge. Look at it this way. This is money people already have. Their biggest risk with this money is taxes. So there’s a huge competitive advantage for educated advisors.

But let me switch gears for a second. Many advisors take advantage of continuing education. But too often that education is geared towards product training, marketing training, sales training. You have to remember this: The people who already have money want protection from taxes. People with money want a plan. They don’t want to know what to invest in. They want to hang onto the money they have.

SMA: Is there anything in this field that advisors can do a better job of than what they’re currently doing?

SLOTT: Again, the key is they have to be educated to know the options. You have more consumers than ever in the right demographic. You have a very tax-favorable environment. If you, as an advisor, are going to do the rollover, you need to know how to do the rollover. Advisors need to know if they should take the Roth, should they rollover? Look, a clerk can do the rollover. Consumers can go the 1-800-rollover route. But the advisor needs to stand out and give the expertise.

Frankly, too many advisors do not invest in the education. Once they are educated on the subject, it’s amazing how much that attracts the money. Once clients talk with them, they see the expertise. They understand the educated advisor knows what to do with their money and that they’ll protect them for life.