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Financial Planning > Tax Planning

Ed Slott and the art of the IRA

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Ok, so one of these things is not like the others. Or so it seems.

But who says the work of IRA guru Ed Slott is not a work of art? Have you ever talked to him about IRA rollovers? I recommend you not do so, unless, that is, you have one or two or three hours to kill. Slott, a New York-based CPA, will paint a detailed picture that Rembrandt would be proud of.

The passion fires out of him when he discusses the merits of the IRA rollover. And he does not mince words. If you’re an advisor and have not educated yourself on IRA rollovers and embracing the tax advantages they possess, he will tell you the error of your ways.

As Slott says in one of the many videos featuring him on his website, “You’re the only ones that can create what (consumers) need. And what they need is what you sell. And what you sell is not your products. You sell financial security.”

If you’ve seen Ed Slott in person or on the PBS specials he stars in, you’ve noticed that he does not fall under the Jim Cramer category of “louder is better.” There’s no rolled-up shirtsleeves and manic aping for the camera. Slott wears a dark suit, a blue button-down shirt, a red tie. And he keeps the suit jacket buttoned up–all the time. His style is cool, calculated.

He is methodical in his message, leaving no IRA stones unturned. In art terms, he’s more realist than surrealist. There are no dripping clocks. There is no sleight of hand taking place. He’s not pulling a rabbit out of his hat. With Ed Slott, what you see is what you get. And what you get is the art of the IRA with bold brush strokes.

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 Slott and find out the opportunities out there for advisors.
He 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. Slott’s the best-selling author of Stay Rich for Life! and The Retirement Savings Time Bomb and How to Defuse It, among others.

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

SLOTT: 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 population 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 of that.

SMA: It’s clear the potential is there, but what can advisors do to capitalize on 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 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.

SMA: I’ve heard you make a doctor analogy when referring to IRA experts.

SLOTT: Yes. You have to put yourself out there as a specialist. The doctor analogy is a good way to look at it. Your GP is great, but he’s not a specialist. He’s not a cardiologist, a urologist, a neurologist. IRAs are different than other assets. They are distributed differently in life and after death. Average advisors make the mistake of always thinking product. But if you do the planning, the products will come.
SMA: What are the most common IRA mistakes advisors need to avoid?

SMA: What are the most common IRA mistakes advisors need to avoid?

SLOTT: Not checking beneficiary forms. Oh sure, advisors think, that’s somebody else’s job. But it shouldn’t be. As the advisor you need to be on top of those life changes of your clients: birth, death, marriage, etc. All of those have to be changed. People don’t understand that the beneficiary forms can trump the will. You can imagine the problems that occur if, say, an ex-spouse is the beneficiary and you don’t find that out until the death of a loved one.

SMA: What’s the worst thing that happens if an advisor is not educated on IRA rollovers?

SLOTT: If the advisor’s not educated, the public is underserved, the advisor’s focused on making money and what you wind up with is a tax hit. That’s where you really see the problem. Think of it like a sporting event where you have a first half and a second half. The score at end of game is the key. You can make money, but what will you get taxed? What will you have at the end of the game? That’s the key.


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