Fifty-three percent of U.S. financial advisors in a new poll said their clients had paid more taxes in 2014 than the year before.
At the same time, advisor-client conversations about tax strategies decreased last year, according to Russell Investments’ quarterly survey, released Tuesday.
Twenty-two percent of advisors said taxes were among the most important topics discussed this year, down from 29% who said this in 2014.
Moreover, only 27% of advisors said they currently encouraged clients to use tax-deferred strategies within their investment portfolios.
As to what types of advice to provide, 19% of advisors said they recommended implementing tax-loss harvesting, while 14% simply recommended paying the taxes.
“Right now, many advisors and clients don’t fully appreciate the drag on returns caused by taxes, which adds up quickly, especially in a low-return environment,” Frank Pape, director of consulting in Russell Investments’ U.S. advisor-sold business, said in a statement.
“Reducing this drag and providing clients with a more complete plan for implementing a tax-managed approach is a significant way for advisors to add value, not only to their own clients, but also their businesses.”
For its latest Financial Professional Outlook survey, Russell polled 295 financial advisors working for 194 national, regional and independent advisory firms across the country.
Eighty-one percent of advisors in the survey said after-tax returns were a concern of their clients, reaffirming, Russell said, the importance of tax-aware investing.
And yet, 37% of clients’ taxable assets were not managed by their advisor.
Russell said given that the whole portfolio must be considered when developing a tax-aware plan, advisors who decided to incorporate a tax-aware approach and include tax strategies might increase both their clients’ overall wealth and their own assets under management.