A good tax discussion makes clients glad they hired you

Apr 7, 2022
  • Dennis Lee, Market Insights Lead

My first tax day after graduating from college was a rude awakening. I wasn’t expecting to owe money. I realized then that I didn’t know the rules. A mature response would be to bite the bullet and learn the tax code right then and there. But at that age… I coped with the next tax season by coaxing some friends with a barbecue and football game with the catch that we would do our taxes together after the game. We called it “Taxes Are Fun Day.” We weren’t fooling anyone, much less ourselves.

The value of financial advice

I imagine many investors feel as I did – a sense of confusion and dread. Some have a good grasp of how much they’re supposed to owe or receive, but most likely do not know how to minimize their tax impact in a given year.

This is where advisors can step in and demonstrate their value to their clients. Whether you partner with an accountant or have one on your team, communicating a clear framework for how you’re minimizing your clients’ tax impact can go along way.

Perhaps your clients’ tax bill is larger than normal this year. Do they appreciate that it may be because you managed their money well? And do they know that without your guidance, that tax impact could have been even larger?

As you prepare for your conversations with clients, consider this helpful framework for trading with less tax impact in your client portfolios. It includes a step-by-step guide for making decisions about what to trade and when.

As an advisor, perhaps you already follow a similar thought process. But have you articulated those thoughts to your clients?

An illustration from Trading doesn't have to be so taxing: consider a hypothetical trade of a $100,000 position in Fund A for Fund B, where Fund A has a 25% long-term gain, resulting in a tax cost of $5,950.¹


Articulate your framework for trading and taxes

Nobody likes paying taxes, but there are ways to have positive conversations with your clients. Remind your clients that they wouldn’t be paying taxes if they hadn’t made money. Highlight some of the strategies you’ve used throughout the year to maximize their after-tax returns.

And if you get this right, perhaps April 15 can actually be “Taxes Are Fun Day” – for you and your clients.

Download the guide