Tax issues can be tricky for both advisors and clients.

It’s always a good day to get advisors to talk about taxes with clients at HD Vest. But this week, the broker-dealer gave its 5,000 reps some more fodder for such chats by enhancing its 1040 Analyst tool. 

According to the Irving, Texas-based group, improvements made to the software aim to help advisors and clients strengthen their decision-making by giving them “at least a dozen new tax-sensitive opportunities” and identifying “client vulnerabilities.”

Since its initial June rollout, 1040 Analyst has been used by nearly 800 HD Vest-affiliated financial advisors working with more than 100,000 client tax returns, the broker-dealer says. As a result, HD Vest-affiliated advisors have brought in $94-plus million in new investment assets, the broker-dealer adds.

The latest version of the software includes reminders regarding the age, tax-filing status and beneficiary information for clients, according to Scott Rawlins, managing director of national sales at HD Vest. “With the tool, advisors can really do some basic blocking and tackling, and they can revisit this information yearly and adjust the data,” he explained in an interview with ThinkAdvisor.

“In the past, advisors had do all of this manually by sifting through returns. We wanted to help to bridge the gap, make the connections for advisors and do so in automated way,” said Rawlins.

“With some integrated steps, the tool lets advisors import data from four of the most popular tax and accounting programs,” the executive added. “It’s a snap-entry process. This means an advisor can look at a 1040 form and enter the information, run the data, illuminate potential blind spots and identify possibilities where advisors and clients can have important conversations.”

The tool’s latest enhancements give advisors the ability not just to look back “but to look forward a bit, too,” he says.

Specifically, the software improvements do the following:

  • Enable advisors who are not tax professionals to manually input their clients’ tax form data to yield the customized output through a “snap app” process;
  • Identify opportunities for buy-sell life insurance agreements for business owners; and
  • Give advisors more ways to help clients take advantage of passive activity losses, follow tax-loss harvesting strategies, determine optimal timing for taking Social Security benefits, and calculate the most advantageous distribution schedule for retirement plan assets.

“With the tool, advisors can take up to 28 data points from tax returns and look at them singularly or in combination with other data points to create a custom opportunity to explore what’s been pulled – regarding a client’s income level, filing status or non-deductible IRA, for instance – so advisors can discuss the parameters of what the clients can do next,” Rawlins said.

As advisors broaden their services, they want to look forward and help clients avoid missteps related to income-tax issues,” Rawlins added.

Example: the 3.8% net investment income tax.

“It’s an additional tax for certain individuals that became effective in January 2013 – and many clients are not aware that it can impact them. Also, advisors may not discuss this with them,” if they aren’t fully informed about it, the broker-dealer executive said. “It could be that clients are paying more than they should be.”

The latest version of the 1040 Analyst let advisors look at income, as well as dividends and interest received. “Then, there can be some talking and planning between client and advisor. Many reps are already taking advantage of this, as are some tax professionals they may be working with,” stressed Rawlins.