Updated on: November 3, 2023

Financial planning and tax planning go hand in hand. Including tax planning as part of your service provides clients a comprehensive view of their finances and helps them achieve their financial goals. Financial advisors can use tax planning to show the tax consequences of different actions and to develop strategies that can help reduce taxes in the future. As a financial advisor who is a self-professed tax nerd, I’ve put together five tips for financial advisors who are looking to incorporate tax planning into their services.

Start with Document Sharing

The first step is to ask your clients to share their tax documents with you. This will provide insight into whether they’re claiming any special deductions and provide a better picture of what they might be saving and investing outside of your firm. Even though uploading their tax documents might be one of the last things on your clients’ minds when they’re starting the financial planning process, encourage your clients by reminding them how the tax information will help you help them. To make the process smooth for your clients, consider utilizing a financial planning software solution that allows them to securely upload and share documents with you.

Leverage Technology to Analyze Tax Planning Strategies

Even if you aren’t a tax expert, there are resources you can rely on if you want to bring tax issues into your services. Financial planning software solutions can be used to analyze the potential impact of current tax laws and potential future changes in tax levels. Utilizing a software solution that allows for detailed scenario planning will help you showcase to your clients how different strategies can save them money and positively impact long-term outcomes.

Regularly Monitor Tax Rules and Regulations

The rules and regulations surrounding taxes are constantly evolving at the local, state, and federal levels. Financial professionals can ensure they are delivering the most accurate projections and financial plans to their clients by staying up to date on the ever-changing tax landscape. IRA contribution limits, available tax deductions and credits, charitable gifting strategies, and any potential tax changes that could affect clients are all things you should consider monitoring.

In addition, we can be confident that tax rates will continue to ebb and flower over time. Tax rates are likely to go up in the future, but we can’t predict how much or when. These changes in taxes can have significant implications on your clients’ short- and long-term financial plans, which is why tax mitigation plans need to be regularly reviewed and updated.

Prepare to Collaborate with Tax Professionals

Partnering with your clients’ tax professionals will help optimize their financial plans and maximize their ability to achieve their financial goals. Because you and a client’s CPA are viewing their taxes from different perspectives, you can combine those views to create a more holistic picture for your clients.

I form strategic partnerships with Subject Matter Experts to help my clients build a virtual team of professionals that covers all of their needs, including CPAs. My goal is to provide quality long-term projections in conjunction with their CPA so the client gets the full benefit of their team’s knowledge and expertise.

If you plan to collaborate closely with partners, it’s helpful to utilize digital technology, to share client documentation. Some financial planning technology solutions offer features that make the information exchange process smooth and simple.

Be Ready to Navigate the Emotional Element of Tax Planning

There is a unique emotional element in tax planning because money and taxes are personal. People often react differently to changes in tax laws or tax mistakes than they do when faced with challenges of other natures. In addition, tax issues can bring a client’s political views to mind, which can further complicate their feelings and decisions.

When a financial advisor is beginning to work with a client on tax issues, it’s important to build a rapport so they feel comfortable opening up about their beliefs. In my experience, it’s best to set your own views aside and listen to how your client responds to the strategies being presented. While I am happy to explain my personal views if a client asks for me to elaborate, I prefer to focus on the practicality of the strategies discussed in our initial conversations.

My goal is to build a plan that aligns with their goals and passions. For example, some tax mitigation strategies are charitable in nature. If we’re looking at those types of strategies, I want to ensure to align with the client’s charitable nature, rather than looking at it from a pure dollar amount perspective.

By providing the client with a neutral point of view and letting them elaborate on what interests or concerns them, you can help them self-discover the tax planning strategies that fit their needs and their beliefs.

Optimize Your Clients’ Financial Plans with Tax Planning

By incorporating tax planning into your services, you can add tremendous value for your client. Leveraging technology, staying up to date on changes in tax laws, collaborating with tax professionals, and building a rapport with your client so they feel comfortable discussing their concerns can help you successfully maximize the benefits of tax planning for your clients.

To learn more about how I help clients navigate complex tax planning strategies, check out this case study.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

The views and opinions expressed by this blog post guest are solely those of the guest and do not necessarily reflect the opinions of eMoney Advisor, LLC. eMoney Advisor is not responsible for the content, views or opinions presented by our guest, nor may eMoney Advisor be held liable for any actions taken by you based on the content, views or opinions of the guest.

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