What Tax-Savvy Advisors Want From Partners

For the past few years, broker-dealers, or what we like to call independent advisory and brokerage firms (IABs) given the rising number of fee-based client relationships across the industry, have focused their efforts on serving advisors in a post-Department of Labor fiduciary rule environment.

The fundamental question was how to provide the tools, resources and platforms needed to ease the transition from a sales and commission-based business model to one that furthers the delivery of advice.

Now, though, the recent overhaul of the tax code has presented our industry with another challenge or opportunity, depending on your outlook. Firms are now, more than ever, considering how to service the ever-growing list of advisors who have added, or are seeking to add, tax-planning capabilities to their practice.

This is hardly surprising in light of recent reforms. With advisors focusing on providing clients with more of an end-to-end, holistic and advice-based experience, enabling tax-savvy investment strategies should be a core focus for any firm going forward.

But not everyone will be able to deliver what advisors need. The following is what firms have to deliver to tax-focused financial advisors:

1. Formalized, in-house professional networks. It’s not at all uncommon, of course, for advisors to come together informally to discuss the latest industry trends and swap best practices.

Many tax-focused advisors have been commiserating with their peers like this for years, especially since, up until now, it has been a relatively small group.

IAB firms, however, are uniquely positioned to take such gatherings to the next level by using their collective resources to build a more formalized, professional network consisting of tax-savvy advisors within their community — who, beyond having similar business models, are likely to have a common set of goals and a shared culture.

This may include hosting regular webinars. The aim would be to reinforce existing best practices but also to shed fresh light on a slice of the tax code that is either commonly misunderstood or not well known, but which could have significant financial planning implications for clients.

It may also include study groups to facilitate the exchange of new ideas and to brainstorm new services and offerings that would benefit clients. Tax preparation may happen once a year, but tax planning happens throughout the year.

2. Tax-centric technology tools. Even the most experienced tax-focused financial advisors have trouble navigating the complicated thicket of rules and guidelines that make the United States tax code. Without the right tech support, it’s pretty easy to miss out on opportunities for clients — or, worse, cost them money.

There are, for instance, rebalancing tools available that will help advisors better manage the tax implications associated with short- versus long-term gains, as well as the ones derived from losses.