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In addition to the valuable investment guidance you provide clients, suggest reviewing tax forms such as W-2s, 1099s and K-1s with clients soon after they receive them to:
- Gain a more complete understanding of a client's full balance sheet.
- Look for areas that invite a deeper conversation with clients.
- Identify potential opportunities to improve tax outcomes in the coming year.
Consider these three scenarios resulting from document review:
- A charitably inclined client
Suppose you discover your client generally donates cash late in the calendar year. Open the door to a conversation about how gifted stock can help reduce capital gains tax by asking: "How do you feel about gifting some of your highly-appreciated stock in lieu of cash?” - A client with vesting equity awards
A review of your client's equity award statement might reveal a mix of already-vested awards, such as restricted stock units (RSUs) or non-qualified stock options (NQSOs). Consider asking: "What’s your understanding of how different exposures to employer stocks are taxed?" - A client with 1099 capital gains resulting from portfolio rebalancing
A client’s 1099 shows a large portion of realized gains resulting from mutual fund distributions and rebalancing of asset classes to align with a target asset allocation. Consider asking: “What are your thoughts on exploring tax-managed investment ideas to help alleviate out-of-pocket costs of future capital gains?”
Remind clients of your important role on their tax teams by asking questions such as:
- "Can you share what assets and liabilities might be held elsewhere that we should incorporate into a more tax-efficient plan?”
- "What upcoming family milestones, like births, marriages, divorces or retirements, should we consider when optimizing your tax outcomes?"
- "What role do you see your investment portfolio playing in providing income during your retirement?"
Having tax-aware conversations with clients now can arm them with better questions for their CPAs in March and April. Whatever answers their tax professionals provide, clients will still look to you to implement their investment strategies.
Bottom line: The best way to be seen as a member of each client's tax team is to act like one.
Having tax-aware conversations with clients now can arm them with better questions for their CPAs in March and April.
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