Issue link: https://resources.envestnet.com/i/1527484
Clients expect tax help but aren't receiving it Clients want their advisor to be thinking about taxes, but many aren't. This is an opportunity for you to differentiate your practice and enhance your value prop. Tax planning advice Service expected Service received 89% 25% Source: Spectrem August 2021 Defining Wealth Management. Neither Envestnet, Envestnet | PMC nor its representatives render tax, accounting, or legal advice. 5 Tax conversations deepen client engagement and empower advisors Investors spend more time thinking about taxes in today's environment, especially those sitting on significant unrealized capital gains. They may be questioning whether to hold onto these positions, so they don't take the tax hit, but then worry about the impact on their asset allocation strategy and portfolio returns. Taxes can often be a client's biggest expense. This creates an opportunity for you to provide value and deepen your relationship by proactively identifying ways to help them save money. That means comprehensive tax management needs to be an essential part of your value proposition. If you're not having tax planning conversations with your clients today, the chances are that someone else will be educating them about opportunities to manage their overall tax burden. In fact, research shows that investors expect their advisors to consider taxes when managing their portfolios, with 89% expecting tax planning advice but only 25% receiving it. It's important to align your services with what today's investors want and need. Risk management and the search for tax alpha demand greater focus While risk management is always a critical consideration, when combined with a focus on tax alpha, you can manage risk, monitor tax exposure and customize tax-efficient portfolios. Many advisors engage in annual tax-loss harvesting at the end of the year, but the losses might not be available then. Some advisors find themselves selling securities to avoid capital gains taxes and then repurchasing these same securities at a higher price later on. Other advisors don't sell appreciated securities because they don't want to deal with the tax implications. That is when model drift can occur: an investment portfolio with a target weighting that places 60% in stocks and 40% in bonds can quickly drift to a 70% stock and 30% bond allocation, exposing clients to more risk. Top advisors are increasingly leaning into sophisticated services that optimize risk and help ensure portfolios are aligned with a client's risk tolerance, preferences and tax sensitivities. 4 3 MKTGM1123U/S-3208539-5/12