And so as I just really started to hone in on how tax brackets work, and I was kind of joke that like, and I even do it still to this day with my clients, it’s like, oh, we’re gonna, we’re about to talk about what tax bracket you’re in and I wanna make sure I under that you understand a cursory explanation of what the brackets are and how it works. And then I always insert the joke of like, well, and this is the most fun conversation you’re gonna have all day. Like not right. And nobody’s ever been like, you know what, I really can’t wait to meet, to talk with Ben about in our meeting at over a happy hour is like what tax bracket I’m in and how I got there. And so I think really the first iteration was really the acknowledgement that the step ups from, you know, the 10 and 12 up to 22 and 24, wherever they were at the time, that those leaps were big. And that if there were levers we can pull to mitigate the jump even just for another year or two, then it, the tax savings was actually pretty meaningful. And it, and obviously applies as you there’s sort of the three rungs on the ladder where the jumps are pretty big. And so it started with the desire to help people not leap up the bracket ladder faster than they needed to. I think that was really the first wave of effort, so to speak.

Steven

Well I mean that’s great to hear. I like you said, these aren’t prepared questions and they certainly aren’t prepared answers, but that, that was, that was really kind of what I was expecting in a way. Just because what I find Ben, is that a lot of times advisors will talk about tax planning and even when they come to me to listen about tax planning, they’re waiting for some obscure seldom herd of idea that that’s gonna revolutionize a client’s life overnight. That it’s, if we set up this kind of trust under this kind of umbrella on this Cayman Island, then there’s no taxes ever again. And then that’s our idea of, okay, that’s when tax plan needed. And that’s such just a load of crap that for a lot of people, and a lot of the advisors I find like you who identified this early and commit to it often are the ones who realize that when we talk about complexity, we’re really talking about it from the client’s perspective, not necessarily someone with a graduate degree’s perspective.

Because I’m sure for you the brackets aren’t hard to understand, but for someone moving up through those brackets, this is a conversation no one’s ever had with them before. They’re only if someone points it out to ’em are they really realizing just how much of their income they’re giving up to taxes as they move up those brackets. Cuz they go from, especially if they have kids that maybe they’re paying a few thousand dollars a year in federal income tax and then they start having some of these jumps and they turn around and they’re paying 20, 30, 40,000 a year in federal income tax. And they’re so hung up on, did I get a refund or not? That they don’t even have the awareness that they’re getting killed on taxes. And so you taking the time to get their 1040s and to help ’em understand what bracket they’re in and those levers they can pull, that starts having a huge difference, especially for someone in their thirties or forties who you can work with for the next 40 or 50 years. Even a few thousand dollars a year in taxes over 50 years adds up to big, big dollars.

Ben

Yeah. And it’s interesting because that was, you know, it was really, that was like a gateway drug in a way. Like we didn’t get a lot of credit for saying, well here’s a bracket you’re in. Cuz that was very easily googleable, right? If somebody actually wanted to know. But what that made it very easy to, to gateway into these other conversations around like, well, if you did these couple of things, if you just, you know, if you could find a way to max out your 401k then you might actually save yourself from tipping into that next bracket. And then that easily and quickly led to like, oh, by the way, here’s where you would tip into the bracket next. I’m not saying don’t go make more money, but I am saying like, you should be aware when you’re going to like, and so we started to map out this kind of tax roadmap, if you will.

It was never an actual little more roadmap. We didn’t need to, I suppose there’s plenty of advisors out there who will, who would be like, well, I’m gonna get my marketing department involved and go design a roadmap. It wasn’t that, you know, it wasn’t, it wasn’t that formal, but there were lots of different minor offshoot conversations that we could have just by helping somebody understand what bracket they were in, was there any lever they could pull to drop down to the lower one and or were they at risk of going to the higher one? And if not, then when would you be at risk? And then that became the platform through which we started collecting 1040s and then that spun into the other iterations, which if, you know, happy to share the other things we do now from that first wave, probably five or six years ago, seems like every year or every other year we add another layer of tax complexity. I don’t know if I can keep up that velocity, but here we are. I just have to try to keep up. Right.

Steven

Yeah. No, actually Ben, that would be great to talk about how those iterations have progressed. Cause I love that you made that comment of it’s changed every year and the advisors I know who are doing the most around tax planning, that is a common theme that this is an evolution. Again, it’s not, we woke up one morning and we’re experts at tax planning and it fits seamlessly into our processes. It’s an evolution over time. And so we bite off something relatively simple and then we build from there. So what have some of those other iterations been?

Ben

Yeah. I think, you know, the next obvious territory for us that we discovered it, which it’s so obvious in hindsight, but like we weren’t taking the time to do it. And I know so many advisors who aren’t, was we committed to having a deep understanding of what various holdings that we either had or would consider putting into portfolios with the tax impact was from qualified versus ordinary dividends. So we, you know, we one year we actually made a list and put it on the wall like, these funds are kicking out qualified, these funds are kicking out ordinary, you better know which ones are which. Right. And so then that really led to, okay, we wanna, as we started to ask, well, I, this is again another one of the iterations. I think in the beginning, I don’t know how much I even asked about taxes.

You know, I would ask who your accountant was and I would ask just to get some, you know, do you feel like you paid too much in taxes? Okay, we’ll try to like max out your 401K to help that. Right? There wasn’t a lot of, but then as we said, okay, well what if we started collecting everyone’s 1040 s even if they’re no, you know, no owners, no rental properties, no complexity,  what if we just started looking at everybody’s qualified versus ordinary flows and cap gains, making sure that we basically didn’t trigger any short-term cap gains. And I knew what tax loss harvesting was, but around that same time, that became a no-brainer to start being really proactive around tax loss harvesting. Right? And so I think that was kind of the second iteration was gathering 1040s, really committing to having everybody.

And our, and our higher income base was really open-minded around maxing out of flow. Okay. And, and unless there’s like a magic advisor out there who all their clients come to them already doing all the right things, which I, you know, of course that’s not the case. And every advisor out, there’s like, well, yeah, I’m still waiting to meet that client. But most of the clients, you know, we had, it was a, it was a process to get them even to like max out their form, okay, max out your hsa. So okay, here’s a checklist, here’s a tax checklist. We need you to be doing all these things. Here’s the things we’ll do. Tax harvest thing review 1040, those kinds of things. That was all kind of part of that second iteration around having a better understanding what qualified and dividend, qualified ordinary flows look like, Cap gains look like tax harvesting 1040 gathering. And then really I think the next one as that, probably the next one really is gonna start to coincide in my backstory with when I started to do way more work with business owners and started to either shift some of those more conventional W2 clients to other advisors on my team or to my right-hand advisor. And some of ’em we still have, but now like probably 70% of my client base is now a business owner and nearly maybe 60 to 70 and nearly a hundred percent is of new coming new inbound clients, our business owner. So that obviously became a lot of fun. I went and got certified as a certified exit planning advisor. Obviously a big piece of the exit planning process is how much tax am I gonna have to pay if I sell and do I do a stock sale versus an asset sale?

So then you started going down those rabbit holes, right? I would say we started to do a lot more donor advised fund management at that point. We started to do a lot more batching of, I don’t, maybe there’s even a technical term for it that you use, I don’t know. But you know, we’re now, we’re looking at, we do, do you wanna do three years worth of charitable contributions in a given year and then, you know, batch those multi-year charitable contributions into your DAF and then buy yourself the standard deduction the other two years. So  as we started to do more of that just like financial engineering, which is not the same as like find me the Magic Tax code act that allows me to just make, I always laugh when somebody’s like, well what can I do? Because, you know, when they ask, when they ask that question to, by the way they could they ask of, of you when they come see you cuz they want you to figure out a way that they can cheat or they ask it of me, they wanna sell their business.

Cause they’re like, there’s gotta be, I literally had one this morning, he’s like, well I’m thinking about buying a farm. I’m like, really? Why you, I know you, you’ve never farmed in your life. You don’t come from a family, a farmer. He’s like, well I heard there was this tax thing by loophole if I like bought a farm. I was like, oh my gosh, this is now I hope that client doesn’t listen to this because they’re probably gonna be like, think I’m making fun of them. I’m not making fun of you. I promise if you wanna buy a farm, go for it. But I do think if you’re gonna buy an asset for tax reasons, a farm is probably about as high maintenance as it gets. And so I’m not convinced that’s the best strategy for a lot of people, but any, you know, that’s when people come up with these hair ideas is when they know they’ve got a big tax cost coming down the pipeline and they wanna do something about it.

And so we’ve continued to just work with CPAs to figure out even it through the exit planning process we’ll get involved in, this is kind of the most recent iteration is through the exit planning process on a business sale. We’ll actually get involved in negotiations, help structure a deal flow, earnout schedules, et cetera, to try to figure out is there a way we can mitigate taxes by maybe annuitizing the payout over a period of time or kicking the payouts to the following year or looking at the way they structure an earnout. And so there’s, there’s, there’s a lot more we can do, but as you know, it’s like, it’s not magic. Yeah. A

Steven

Yeah. It’s certainly not magic, but that example you gave of the client you were talking to earlier, I mean that’s all too common and  I’m with you. It’s not about making fun of that particular individual. I mean, this is really common this is what they’re fed through social media, through the news where wherever they’re getting their tax information, those are the attention grabbing headlines of, Hey, go do this one thing and this one thing’s gonna magically fix everything. And it’s like, no, no, that’s, that’s not how it works. One, that’s probably not how it works at all. Maybe it works in that one specific situation, but for most people it’s doing these simple things consistently. And so I really like how, as you talked about the progression, at no point did you just give up on those baseline things. You kept adding things to it. And I like that you, that for you the progression was, Hey, let’s just start with these W2 employees who can do these relatively simple things. I think a lot of times people get hung up on, oh, well if I don’t work with business owners, there are no tax planning opportunities and that’s just categorically false. There is definitely some more interesting things that come up for business owners, but if you pay taxes, there is tax planning worth doing depending on your income and some of the options

Ben

Yeah, I mean we literally start the new year. Like I think in every meeting we do here after the new year as part of our surge, like we allocate time in those meetings to say, Hey, by the way, just so you know, you know, we’ll ask our, our discovery questions around income. What, where income finished last year, where do you think it’s gonna go this year? Okay, if that’s how it plays out, here’s what tax bracket you’re being in. And it’s not even too early to start talking about like if T C J A expires just a heads up like that either A, won’t impact you or B, you could expect your tax rate that is currently 24 to go up to 28. You know, so we didn’t, not only do I think people use the lack of complex tax as a reason to punt on the rest of the thing, but in reality, what I think boil lives is a lot of advisors don’t wanna learn the nuance tax.

Like it’s just not enjoyable. And yet it is, like I’m not the only one I know of having listened into some of the other podcasts and I gotta pick on my buddy  Michael Henley who is just, you know, like I’ve never seen anybody get more excited and fired up talking about taxes who isn’t doing accounting than he does. And how many people technically at some point in their life probably should be doing a Roth conversion of some sort. It’s a massively high number if we’re just talking about sort of optimal financial management. And you don’t ever have to own a business or a rental property for that to apply to you. So Yeah, absolutely a hundred percent. I don’t think that complexity is a mask that allows a lot of advisors to avoid because they’ll go, wow, my client base isn’t owners fine, great. You should be talking about taxes all the time.

Steven

Yeah. Oh, I agree a hundred percent. And yeah, Michael’s a great example of people committed to tax planning and I’ve been to a couple of conferences with him. He’ll actually, he records the session he goes to and then re-listen to him. He’s got an incredible commitment to it. But for, for people listening, even if you don’t take it to that level, um, the, there, there is work involved in this and I’m sure Ben, you would agree with this. There definitely is work involved in tax planning, but it doesn’t have to be this big scary thing. It’s not gonna consume your whole life. Even though I’m the tax guy, I know that taxes are only one piece of the puzzle. It can’t be the conversation that dominates every client meeting all year round. But I like that you pointed out that even at the beginning of the year, it’s on your search meeting agendas that at some point that conversation taxes are gonna come up because guess what? Every money decision has a tax impact. And so I I love that you’re just leading with that.

Ben

Yeah, I think it’s, you know, as we, this gets talked about a lot and I know you don’t really need to have a horse in this race cuz your value, who is taxed no matter what. But I definitely think for me personally, as the emphasis has lessened on investment, you had to replace that with something. For me. I had to replace the work, right? I didn’t have to, some people say, oh well, you know, we could have just been doing Vanguard for 20 years. You could have, I wasn’t, I was spending a lot of time deep in the weeds on complex investment research and so, you know, as I stopped relying on and and committing to a complex investment strategy  I do think that taxes complex as they are, are probably a less esoteric way for clients to understand their financial life just because they know they have to pay them.

They’re an inevitability. And so I think there really is an appetite amongst people to have their financial advisor talk about taxes. I think that a lot of the apathy and the sort of like avoidance around tax conversations is actually not on the client side. I think it’s on the advisor side. So, yeah number one, I think just to, I think it’s table stakes to be a really great advisor today. I think that’s just part of it. But also like it doesn’t, I  don’t want to, this could be misleading and I don’t want to do that. I don’t spend a lot of time talking about taxes. We just talk about it regularly, but it’s not like a time consuming part of the agenda.  Cuz then my clients would probably check out. It’s like, oh, you want to talk about that for 30 minutes? Yeah, I think I’ll just

Steven

That’s actually one of the jokes I have to make. As we, as we work with advisors through our premiere program and we collaborate on tax planning and preparation, I’ll get some advisors who say, so, okay, so how many hour long meetings do you have with a client during a year? And I say, actually, it turns out most people aren’t looking to sit down with a CPA for an hour at a time. That’s nobody has the attention span for taxes that long. And I’m fully aware of that and I have no problem with that. And so we start at 15 minute meetings, we go through the really important parts, we’ve sent ’em information ahead of time and we because of the work I do with the advisor, we’re able to get through it. Cuz that, that’s a great distinction to make there, Ben, that while this comes up regularly, it’s not the dominating piece of the conversation, it’s just something that gets addressed and acknowledged consistently.

Ben

Well, if I can give you some anecdotal evidence for where you’ve landed. I sat on the board of our local TED conference for several years. There’s a reason TED talks are 18 minutes. They found that most adults in today’s society has about an 18 minute tension span for any topic. So if the topic itself is actually less interesting than broad, you gotta, you know your attention span might be 12 to 15 minutes to talk about taxes tops. So

Steven

Well then Ben, on that note, we’re getting close to the 30 minute mark so we better switch to action items before we lose everyone’s attention span. So since, since you’re my guest, I will let you go first. As you think about our conversation today, what’s an action item that you would recommend to advisors to make sure they’re doing something on tax planning?

Ben

Yeah. So there is, I love the book Atomic Habits. If anybody’s read James Clears Atomic Habits. He’s got a line in his book where he talks about if your goal is to be the outcome, it’ll never stick as well as if your goal is to change who you are and how you think. Meaning if you don’t, I wouldn’t start, if I’m an advisor who doesn’t do any tax planning today, I wouldn’t start by saying, my goal is to do tax planning. That’s the outcome. The goal is to be an advisor who cares about taxes and understands them, right? That’s the, that’s the who do I wanna Be not the, so for me, that was, that started with a, I think a, you know, a healthy exercise for a lot of advisors to do, particularly in their careers when it’s not, when there’s less complexity in your own life, is a helpful start for me.

Was doing my own taxes for a couple, few years. I wanna do my own taxes, not at all now, right? But in the beginning it was a very helpful exercise for me to understand how tax codes work by doing my own taxes when I had a very low, you know, app. A very, and now if you’re, don’t put yourself at risk or that kind of thing, right? Pay a cpa, but even if you pay a CPA to do your taxes, go line by line through your own return. It’s the easiest, you know, your own financial life. So when you pair your, what you already know about your own financial life with your own 1040, you learn things. Oh, that  thing I had that I told my CPA about goes there in a return. Oh, that’s where a schedule C is. Oh, that’s how these things all kind of work together.

I also then don’t be afraid. So one exercise we did early on that was really helpful for me before I committed all the memory was I printed a blank 1040 and just highlighted all the things that counted towards modified adjusted gross. Cause I kept seeing modified adjusted gross everywhere, right? Healthcare premiums and IRA phase out limits and all this stuff. So it’s like, well, you know, for a while I couldn’t even tell you what modified adjust gross income was made up of. What, what was the composition of it? So I kept a cheat sheet super helpful to actually get to the point it was like, okay, that counts, that counts, that counts, that doesn’t count. That’s post. That’s post. And so that’s another helpful exercise. If somebody’s like, well, where do I even start? Get a few of your better clients, 1040 s One of the, one of the odd things is I started getting credit from the clients when I asked for the 1040 s I didn’t even need to do anything with them, but just the fact that I asked for them in the client’s eyes was like, oh, that’s just one more thing.

I wasn’t gonna tell them I didn’t know how to interpret it. I, you know, I spend a lot of hours like trying to interpret it. But the point is, you get client credit for the things that you try. You, if you can find outcomes, that’s wonderful. But I was blown away when we started telling clients, Hey, I know we’ve never asked you for this before. And I was even a little worried about that sort of perception of like, well, why are you asking for that now? Why didn’t you ask for it? In the past it was like, hey, we’re, you know, we just came up with a very simple narrative, like we’re doing deeper tax planning. That’s kind of our focus for the year. We have kind of a mantra within my own team, not the entire firm, but myself and my team. We pick one thing every year that we break and we build back better. And so every year it changes. And our clients who’ve been with us for a while, kind of even now, they’ll be like, so what are you gonna break this year? And you know how, and now they know like, oh, this is, and this is again, this is kind of an ex-military thing, it comes from, from my background. And so that year we just said, Hey, we’re, we’re gonna break. Like we’ve

never done, we’ve never asked for your, for a tax return. But what I was floored by is, as we started asking for a tax for 1040 s in mass was the clients we’re like, I’m kind of glad you asked for that. Like it’s part of my financial picture. Like, it sort of feels like, and I, and I never knew that that would be a thing.

So start with, you know, the clients who are easiest to ask or closest friends or whatever, it’s like we’re doing something new this year. We’re starting to dive deeper into taxes. Can you, can I send you a digital upload link to securely send me your 1040 tax return? Or, and or can I collaborate with your accountant? You already told me they are occasion, you know, can I send them an email on a copy of you and have them send me securely a copy of your tax return so that I can make your life easier. You don’t have to play middleman or messenger. Don’t do this in March. Steven can vouch are gonna you, if you’re asking for it in March, it’s bad timing to be recording this. But like May, June, July, we’re asking all of our CPAs to send over the client’s tax return.

We copy the client on the email so the client can see that back channeling what’s happening. We get credit for the effort and then we’re often collaborating with the CPA saying, Hey, we’re thinking about doing this. Right? Sort of the, the way I’ve always understood a, a relationship, again, this kind of comes from my upbringing with my father and just sort of seeing accountants like I’ve always sort of perceived right, wrong or different. Please don’t hate me for this, is that  most accountants, their job is to answer yes or no questions, right? Can I deduct that? Will I get, will I go to jail if I do this? Would you know it? A lot of CPAs don’t want to actually be the ones to come up with creatively and proactively what those questions are. And not to mention when you look at the statistics around how many households the CPA is filing the tax returns for, very few CPAs have time to think about somebody’s financial life.

So a good advisor needs to be the one asking those questions, right? They don’t, I don’t, I never overrule the cpa, I never override the cpa. I never say, you should be doing this. And if your CPA says, no, you’re an idiot, he’s an idiot. Fire him. Like, it’s always, Hey, I think we, we we’re thinking about doing this. We think it’ll help improve the overall strategy, direction and outcomes. Can we get your blessing on this? Something like that, right? And, uh, it’s an easy low hanging fruit way to start because the CPA always has permission to say, eh, there’s this thing you’re not thinking about over there. And you’ll never get penalized for that because you’re not a tax person. So you don’t have to understand the nuance of the return. So you get credit if it works, you get, you get bailed out. If it doesn’t, it’s a a very risk-free proposition to take the relationship deeper with clients. And if you never had a business owner or a cross-state tax or an expat or a rental property portfolio, you could do all the things I just listed. Get more credit with your clients, start cutting your teeth and, you know, you could do that for everybody in your client book if you so wanted. So,

Steven

Yeah. Ben, so many great things in there. I really appreciate that. I mean, just to draw a couple really specific things outta there. So making sure you’re getting tax returns for every single one of your clients. Start somewhere, even if it’s gonna build over time, make sure that you have tax planning on your client meeting agendas, even if it’s gonna take just a few minutes of that plan or that meeting. It’s gotta be incorporated. And then I love what you said from Atomic habits of don’t start with I want to be the tax expert. Start with that commitment to this is something I’m going to do for my clients. This is the way I’m gonna deliver value. So Ben, thanks very much for being on the show today. I really appreciate you sharing your, your background and perspective and the great things you’re doing for your clients.

Ben

Yeah, you bet. Always love seeing ya. Thanks for  thanks for letting me come on. And I hope that if two other advisors on the planet decide to, you know, talk about taxes cuz of this, then our work is worthwhile, right?

Steven

Heck yeah. To everyone listening, thanks everyone for being here. And until next time, good luck out there. And remember to tip your server, not the IRS.