Successful Firms Have Called The Next Play, And It’s Tax Efficiency
I talk with leaders in the financial advice and wealth technology space in my weekly podcast, WealthTech on Deck. Len Reinhart, founder of Lockwood Advisors Inc., and John Thiel, former head of wealth management at Merrill Lynch, and others observe that people are making life-changing decisions about retirement more quickly and consolidating assets at record-breaking levels due to the Covid-19 pandemic.

The happy consequence of that, combined with strong market returns for the past many years, is that advisors and firms—Morgan Stanley, Merrill Lynch, Ameriprise, Raymond James and many registered investment advisors (RIAs)—are reporting record assets under management and positive inflows.

Retirees and those about to join them are fretting about inflation and taxes. They are old enough to understand that markets undergo corrections, and many have experienced high taxes and inflation in their lifetimes. They want to hear from you how to retain as much as they can in the face of economic uncertainty and volatility.

Ben Huneke, who heads all product and platform at Morgan Stanley, recently told podcast listeners and me that he believes today’s circumstances—income disparity and the upcoming transfer of baby boomers’ wealth to their heirs—mean politicians will eventually change tax laws. Morgan Stanley, he said, has already—and continues to—invest in technology that helps advisors be tax efficient in locating assets and withdrawing them.

Let’s be honest, our industry has only recently realized that the investors we’ve cultivated for 40 years have reached a tipping point. Now they are converting from lifetimes of accumulation to the next few decades of decumulation. And it’s up to financial advisors to help them keep as much as they can of what they’ve saved.

That demands helping them minimize their tax bills through tax-smart asset location and withdrawals, tax harvesting and rebalancing across the full portfolio, and other tax-wise practices. Watch this space for upcoming advice from Paul Samuelson on five ways to improve tax alpha for your clients.

Are you up for this task? Do you have the technology to provide your clients with tax alpha at scale? As the number of retirees grow by the day, these issues of taxes and inflation will be with us for a very long time.

Jack Sharry is co-chair of MMI's Digital Advice Community. He serves on the Next Chapter Advisory Council, hosts the WealthTech on Deck podcast, is the author of the book Authentic and Ethical Persuasion, and is executive vice president of LifeYield.

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