5 ways to add value with year-end tax planning conversations

A recent article in The Wall Street Journal, “The Problem With How Many Financial Advisers Set Their Fees,” advised readers (likely your clients) to ask these questions when it comes to the fees you charge: “Why exactly am I paying the fees I’m paying? Can you quantify the value of your services?”

What are you going to tell them? Are you adding value to their retirement investments?

You absolutely can add value with tax planning, and it’s something that’s easily quantifiable. Some call this “tax alpha,” but to your clients it shows that you’re providing valuable planning services above and beyond investment management. Retirement tax planning can help clients save tangible sums in taxes that could otherwise cause significantly higher losses than any stock market crash would.

If your firm disclaimers say you can’t or don’t do tax planning, you’re in trouble. That is where many clients’ funds are — in individual retirement accounts and 401(k)s — and clients need help navigating retirement tax moves.

Every adviser, whether they say it or not, does tax planning. If you touch an IRA, you are doing tax planning since retirement accounts are loaded with taxes. If you do or advise on a Roth conversion, you’re doing tax planning. If you accept a rollover, you’re doing tax planning. If you accept an IRA contribution, yep … you’re doing tax planning.

Fees are only an issue in the absence of value!

Here are five ways to show the additional value you bring to the table with retirement tax planning. For more detailed information on some of the ideas highlighted below, I’ve provided links to my recent InvestmentNews columns.


Talk about year-end tax moves in light of pending tax proposals.

Clients hear and read the stories in the news and want to talk with someone about how these proposals might specifically affect them. They need to hear this from you. These are the kinds of communications and conversations that take the focus off fees and add to your value. They might read about these topics on their own, but they need you to explain exactly how these tax proposals would affect their retirement and estate plans.

For example, one proposal would ban so-called “back-door Roths” starting next year. This would include mega back-door Roths, where this year up to $58,000 can be contributed to an after-tax account in an employee’s 401(k) and then converted generally tax-free to a Roth IRA. If a client qualifies, they will need to get this done before year-end in case the proposals become law.


An adviser can literally save a client’s retirement savings from complete taxation with astute planning. In a recent case, beneficiaries wiped out their own inherited IRA funds by moving funds the wrong way in order to be able to invest in stocks. The effective “fee” these people paid was 100% of their inherited IRA. Looking back, they probably wouldn’t even have thought about fees if an adviser could have spared them from this fate. The entire account was taxed immediately. An adviser who knows the IRA distribution tax rules could have saved these people an easily quantifiable fortune.


Remember that the CARES Act waived required minimum distributions for 2020, but they’re back this year. However, the SECURE Act raised the age to begin RMDs to 72, which can make RMDs a bit tricky this year for those who turned age 72 in 2021. Also, 2021 RMDs will likely be larger since no RMDs were taken in 2020 and the market was also up last year. Make sure clients will have enough taxes paid in to cover their 2021 RMDs. This can help them avoid an underpayment penalty.


With the potential for higher taxes looming large for your clients with the largest IRAs, add value by addressing Roth conversions before year-end. Identify clients who can benefit now from a Roth conversion for future tax savings and as a hedge against the uncertainty of what future higher tax rates could do to their long-term retirement and estate plans.

Here are some great year-end Roth conversion strategies. There’s lots to talk about here with both clients and their tax advisers, especially now that we are near year-end, when 2021 income can be better projected to estimate the tax cost of any 2021 Roth conversion.


Nothing says “I care” better than following up after the sale. Your clients already trust and rely on you. Following up, either to make sure their planning is on track or that retirement-related transactions are done correctly before the year closes, helps reinforce these bonds and their confidence in you. Mistakes are much more difficult to fix after the year ends. For example, make sure that any Roth conversions, back-door Roths, and RMDs intended for 2021 are actually completed by Dec. 31.

In a recent private letter ruling, a lack of follow-up by the adviser and the financial institution left a couple with tax problems related to attempted back-door Roths when the funds erroneously were deposited directly to a Roth IRA rather than to a traditional IRA. It was the couple, not the adviser, who discovered the error, but not until several years later, when the usual remedies were no longer available. In the PLR, the IRS allowed the error to be fixed, but not until after the clients were forced to spend thousands on requesting the ruling. The ruling fee alone was $10,000. This could have all been avoided if the transaction had been checked with proper follow-up, and the adviser would have been seen as a savior.

Here are several other year-end items to discuss with clients before 2021 closes, each of which can add long-lasting value:
Qualified charitable distributions for clients who qualify.
Mega QCDs. This opportunity expires after this year. Most people don’t know about this, including most tax advisers! For the right client, this can be a huge tax saver.
Follow-up on estate plans and beneficiary forms. Always check beneficiary forms, especially this year given the big changes made on post-death distributions from retirement accounts under the SECURE Act. The stretch IRA was eliminated for most non-spouse beneficiaries and replaced with a 10-year payout rule.

Have these conversations now, and questions about your value will answer themselves.

See you all next year, with more retirement tax-planning strategies for you to share with clients. Keep learning and keep earning. Happy Holidays!

For more information on Ed Slott and Ed Slott’s 2-Day IRA Workshop, please visit www.IRAhelp.com

The post 5 ways to add value with year-end tax planning conversations appeared first on InvestmentNews.

Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
%d bloggers like this: