Coping With The New Environment
In turn, this de facto new tax-reporting timetable has significant ramifications for both tax professionals as well as financial advisors. Aside from working more hours or pulling their hair out, here are some recommendations that these professionals might consider:
· Hold a fourth-quarter tax planning session. Rather than waiting until after the first of the year, tax professionals—as well as financial advisors—should at the very least consider meeting with their clients during the fourth quarter, to make tax-savvy moves before the year is over, in order to take full advantage of available tax benefits. For accountants, this means becoming a tax planner rather than tax preparer—a role that actively and holistically engages with the client’s financial life, rather than passively responding to actions of a year that has already passed.
Although this strategy may not prevent all the delays that may arise from legislative changes, it can help to anticipate what may be needed from the client, as well as helping the client to save money.
· Add more services, not more clients. For professionals seeking to grow their business and their revenues, simply taking on more clients may end up becoming too great of a strain on an already busy schedule. Instead, they should consider adding more services to the same base of clients who they know and whose financial lives they already understand. As in the fourth-quarter meetings mentioned above, when a professional clearly demonstrates that greater involvement saves the client money, the client is rarely unhappy about the additional fees that may accompany it.
· Establish a close collaboration between the tax advisor and the financial advisor. With taxes an ongoing consideration, clients should be working closely with both their tax professional and financial advisor whenever undertaking important transactions or life changes. By making the engagement a year-round activity, clients need not be rushed into implementing tax-advantaged moves at the last minute, whether these be making capital improvements in a self-owned business, paying into a college savings plan or looking at estate and gifting issues. And for financial advisors, working closely with the client’s accountant can make sure you are on the same page—and that the accountant will not find fault with your recommendations at tax time or disparage your decisions behind your back.
Today’s tax environment is constantly changing, placing additional burdens and responsibilities on all parties in the equation. New patterns of doing business are emerging, as are new opportunities. And as they do, we see the role of the tax planner and the financial planner inevitably moving closer together.
Chad Smith is wealth management strategist of HD Vest Investment Services (www.hdvest.com), an independent broker/dealer empowering the delivery of holistic and objective financial advice to millions of mass affluent American households through a network of advisors whose roots began and continue as tax professionals.