Gersonde is helping the client create some tax-free income so the client won’t have to pull money out of taxable accounts to pay for vacations. Gersonde also started adding Michigan municipal bonds to the client’s taxable account to provide some state-exempt and federal-exempt income.
By buying individual muni bonds, Gersonde says, “We can control the capital gains.” It means the client doesn’t have to worry about the capital gains that build up after the securities are purchased and before they are sold, Gersonde says. It also helps the client avoid any income that might be thrown off from trades in the mutual funds during the year.
Gersonde spends a lot of time educating clients about not only the tax implications of their investments but also about the fees. Clients may come in without any real understanding that a broker has them in 15 mutual funds with 5¾ loads up front.
“That’s the No. 1 abuse, whether you’re young or old, that I see across the board,” Gersonde says, referring to advisors buying C shares for client accounts.
David Barnes, president and CEO of HFW, also points out that the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations has been expanding its focus on senior investors.
Advisors should be doing right by grandma, grandpa and all their clients.