With tax season underway, I encourage my fellow tax and accounting professionals across the country to take a long look at potential opportunities to add more value for clients by organizing ongoing personal finance discussions with a step-by-step planning process — particularly since COVID-19 has highlighted the role we play for our clients working proactively and how important that role is for keeping their finances on track.
Communication is key in the planning process, particularly during the times of uncertainty we’re currently experiencing. When I spoke with clients throughout the pandemic, whether it was about market fluctuations, Paycheck Protection Program loans or payroll tax reduction opportunities, like the Employee Retention Credit, the financial planning relationship we had already established gave me an advantage to best help them because I already understood their big picture, allowing me to address questions and utilize opportunities much quicker. This proactive planning relationship also allows me to do their tax returns and tax planning much more effectively.
A proactive, holistic client-advisor relationship is a real financial difference-maker. Clients who meet with their tax professional only once a year may find a few nasty surprises in store for them when they file for 2020. And many of these issues amount to missed opportunities. For instance, clients who may have qualified last year for the 2020 Employee Retention Credit but did not get the money last year when they needed it, may find that to get it now will require that they file amended payroll tax reports for last year. Further, an established advisor relationship positions a client well to utilize new and limited programs. The first wave of PPP loan money disappeared very quickly. Many small-business owners who didn’t already have an advisor missed out.
If you’ve ever been frustrated because you wished a client had come to you before they made a financial decision instead of presenting you with the receipts, it may be time you stop accounting for missed opportunities after the fact and consider expanding your client relationships.
Informal beginnings
Many of you may already have clients where their tax relationship has turned into more of a financial planning relationship, almost informally without even realizing it. It often starts by helping with questions like, “How do I sell my house for maximum tax efficiency?” or, “How do I pay for my children’s college?” And throughout the last year, the impact of COVID prompted tens of millions of Americans to make decisions that will have an impact on their 2020 taxes, such as applying for unemployment, tapping retirement accounts for cash, selling a home, adjusting their stock portfolio or even taking on a side-gig. Think of the opportunities to help those clients manage their future financial decisions by coming up with a proactive plan now.
A formalized financial planning client relationship helps you address these bigger questions. As the pandemic continues to impact American’s financial lives, the ability to offer proactive advice will help things run more smoothly and save them money for years to come. Many of your clients who hadn’t previously thought they needed a financial plan are likely to see the value in working with you to develop one after the uncertainty of the past year. Simply start with a list of their assets and liabilities. Talk about what goals they’d like to achieve. See if there is a gap and see if they would like your help closing that gap. Financial planning is simple gap management.
The market volatility of 2020, particularly in the first half of the year, had the potential to seriously impact a client’s overall financial health. How many of your clients will be coming to you this year with an ill-timed capital gain, or even worse, a loss from panicked selling? You can be a sounding board for your clients, providing peace of mind and general education without actively managing money. Be aware of
Knowledge of stimulus programs coming down the line to shore up impacted sectors allows you to reassure clients with longer time horizons that their portfolios have time to recover what may have been lost. As the markets were extremely volatile in 2020, many clients would have likely appreciated the perspective on time horizon and risk tolerance. With continuing economic uncertainty, who among us would be surprised to see volatility continue?
The significant amount of uncertainty that was brought into daily life this past year has been unprecedented. However, the truth is there is always going to be uncertainty and people will always benefit from someone trusted to help them through it. You are already abreast of the latest financial legislation, pandemic aid programs and tax opportunities; now you just need to ask the questions and have that proactive conversation that will add value and security to your clients’ lives.
As you start scheduling appointments this tax season, I encourage you to come up with a list of 15-20 clients whose lives would benefit from a bit more financial forethought, or whom you want to make sure don’t miss opportunities for aid in times of great difficulty ever again. Perhaps they have a slightly more complicated tax situation or are at an anxious inflection point in their life, such as getting married, buying a house or having a child, or perhaps they are starting to see the light at the end of their career tunnel and they need to make sure their financial house is in order for retirement. When you meet to get their taxes in order, bring up the possibility of having a conversation in a couple months about the strategies and programs available to them. So next time uncertainty flares up, you’ll have their finances covered.
If you find yourself having annual “after the fact” conversations explaining what opportunities they missed this tax season, explain to those clients the benefit of developing a plan and touching base throughout the year to make sure it’s on track. Start using the knowledge you have today to save them money in the years ahead and add value to the relationship going forward.
The pandemic has reminded us that life is unpredictable, and it’s hard to know what’s ahead. But when it comes to times of financial uncertainty, understanding the options and having a plan to address them is a tremendous benefit. It’s within your power to help make that happen for your tax clients.
