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Financial Planning > Tax Planning

Tax Season Presents Tremendous Opportunity for Advisors

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What You Need to Know

  • Loss of income, acceptance of stimulus payments, and market volatility can lead to uncertainty about 2020 tax filings.
  • Advisors can use cutting-edge financial planning technology to make tax season easier for their clients.
  • Technology can help advisors run scenarios and advise clients about the taxes they'll likely have to pay in the future.

The months and weeks leading up to Tax Day can be quite hectic for investors as well as their financial advisors and certified public accountants. Like so much over the past year, however, this tax season is anything but run-of-the-mill.

The COVID-19 pandemic has left millions of Americans unemployed or furloughed. Many small businesses have been forced to close their doors, or continue to struggle to survive. The loss of income, the acceptance of stimulus payments, and volatility in the financial markets, among other factors, can lead to uncertainty about tax filings for the previous year, as well as tax planning for the year ahead. 

Tax season is usually stressful, but this year and going forward, advisors can step in to simplify the tax-filing process, and add value by providing tax planning and tax management insights as part of a holistic wealth management offering.

The insights and efficiencies that advisors can provide, aided by financial planning technology, can strengthen client relationships today and lay the groundwork for scalable practice growth tomorrow.

Advisors can begin to make tax season easier for their clients, and their practices, by utilizing digital client portals and account aggregation tools to quickly collect up-to-date information about a client’s financial situation. These technology solutions can not only help clients with gathering data for their tax filings, but also enable advisors to automate the client-onboarding process and spend more time serving and engaging with clients. 

At a time when clients are focused on compiling and organizing financial statements ahead of Tax Day, advisors have the perfect opportunity to ask clients to consider the broader implications of the story those statements tell about their financial picture. Using some modern financial planning technology solutions, advisors can run unlimited scenarios for clients demonstrating the impact that certain investment strategies and products would likely have on their portfolios.

Advisors can also deliver tax forecasts while running these scenarios, predicting the long-term taxes clients would have to pay, regardless of whether clients are seeking a basic secure retirement or have multimillion-dollar estates. These tax forecasts give advisors the opportunity to present ways to reduce taxes to clients and prospects. 

Furthermore, some modern financial planning technology platforms enable advisors to create quick-action reports that break down how taxes are calculated, and choose from a variety of topics in order to make their advice more relevant to each client. Certain technology systems also deploy equity compensation, business planning, estate planning, and other planning modules for allowing advisors to model assets and scenarios in ways that estimate a client’s annual tax impact. These modules can also directly apply stock purchases, business or real estate sales, and estate transfers to tax calculations — and model annual taxes in a comprehensive way, so that clients can understand which tax bracket they should be in, regardless of portfolio complexity.

This year, with clients likely uncertain about how income losses and stimulus payments affect their taxes, financial planning technology can enable advisors to step in to answer those questions, and model tax-smart asset selections and investment strategies designed to reduce clients’ tax burdens. This differentiating value can strengthen relationships with clients — and can be marketed on advisors’ practice websites and social media feeds to engage with prospects. 

Tax season is usually busy and hectic, but with digital financial planning and data analytics solutions, advisors can unlock tremendous opportunity for serving clients better and growing their practices during this period. 

— By Angela Pecoraro on ThinkAdvisor:


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