Frownfelter and Dean Mioli, director of investment planning at SEI Advisor Network, recently authored a paper, “Keys to Building a More Tax-Efficient Portfolios.” Advisors should do a thorough examination of clients' goals, tax returns and asset allocations, they say in the paper.
The two say they are somewhat concerned about taxes increasing because of increased federal spending.
“The important thing is not to invest on the basis of Donald Trump’s tweets,” Mioli says. “Long-term planning is more important.”
In addition to overall market trends, each client’s situation has to be looked at individually, say Jonathan Heller, owner of KEJ Financial Advisors in Newtown, Pa., and Robert Walsh, founder and owner of Lighthouse Financial Advisors in Red Bank, N.J. They are co-authors of a whitepaper, “Tax Alpha: How to Add Measurable Value with Tax-Focused Financial Planning.”
“We may be on the cusp of filing 2016 returns, but after Dec. 31, 2016, it was too late to worry about 2016. Now we are doing 2017 tax prep work,” says Heller. “We are not making any moves on what we think might happen. We hope that rates will be lower, but we can’t let the tax tail wag the dog.”
At the same time, “financial advisors who advise on investments, retirement planning and education saving, but ignore tax planning, can lead clients toward greater tax liability,” the whitepaper says. “Likewise, accountants and tax preparers who limit their client service to filling out forms and making the best of the past year’s information also limit their ability to reduce their clients’ tax exposures.”