Tax Planning Guide for Financial Professionals

Often, your clients will disconnect financial management and tax management when thinking about their portfolio and assets, when in reality the two are closely related. According to Market Watch, taxes are to be considered a significant, life-long expense that should be meticulously planned for to avoid expensive mistakes and avoidable costs. As a financial advisor, how can you be prepared to include taxes in your financial planning strategies?

Stay Updated on Tax Law

Tax laws frequently evolve, which can mean making significant adjustments to your clients' financial plans or portfolios. As an advisor, it's your duty to stay informed on these changes in order to make the best financial recommendations with updated, sound strategies.

Keep Taxes in Mind with All Decisions

Is your client considering investing in real estate? Are you looking into the benefits of adding mutual funds to a portfolio? In every decision, it's important to take a close look at how taxes might influence short-term and long-term rewards. It's easy to forget how seemingly unrelated life decisions can make an enormous impact on your financial stability due to unknown or unrecognized tax consequences. No matter how small an action, thinking “tax-smart” at all times is crucial.

Understand How Tax Brackets Affect Net Returns

Specifically when considering a client's tax future, a higher return might not translate as the best financial choice for everyone. Financial advisors need to look at an investor's tax bracket to make conclusions about the smartest tax-related strategies. Comparative returns from tax-free and taxable investments can be good or bad depending on the unique situation and makeup of a portfolio.

Keep Clients Aware

Tax laws are complex, but it's still important to keep your clients informed on what's happening in the industry and in their individual portfolio plan. While you might assume suggestions and investment changes are obvious, your client may not and being transparent about the decisions you're making helps foster better relationships and trust long-term.

At SII Investments, we provide the education, products, technology and tools to help you make quality investment decisions for clients in all walks to life. Contact SII Investments for more information on transitioning to our broker dealer or how we support our registered representatives' financial business growth.