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We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.

 

Steven (00:50):

Hello everyone, and welcome to the next episode of the Retirement Tax Services podcast, Financial Professionals Edition. I’m your host, Steven Jarvis CPA, and I’m super excited about my guest today because with me on the show, I have an advisor who just flat out refuses to pay the IRS. Like that’s how committed to tax planning he is. Like, I’m all about don’t tip the IRS. He’s just like, you know what? Don’t pay the IRS. So Aaron welcome to the show.

 

Aaron (01:14):

Hi Steven. Thanks for having me.

 

Steven (01:16):

Now, my listeners might guess rather quickly from this conversation why I’m making that joke about you refusing to pay the IRS just based on your accents. But I am really excited about our conversation today because you are based in the UK and obviously we’re dealing with completely separate tax codes, but really we connected on LinkedIn because you follow my content because of the intentionality and the process behind taxes, not necessarily because of my insight into the US tax code. So talk a little bit about how you incorporate tax planning for your clients that you serve there in the UK.

 

Aaron (01:49):

Yeah, no, absolutely. And it’s a great point that we might be in the UK, but the principles of solid tax planning are exactly the same. And we very much believe in our firm that one of the core value adds that we can give a client is just to make sure that they’re planning their taxes and know what they’re gonna pay. And as you said there, you gotta pay your taxes, just don’t leave a tip. And the value that gives to clients is, at first is huge because they feel like, oh, we’re getting value because you are reducing our tax bill. But actually what we’re able to quite quickly put in place for clients is this understanding that minimizing the tax you have to pay leading up to retirement and then post retirement, really, it’s not just percentages or your marginal rate or your actual rate of tax.

 

(02:39):

What it really does give back it is years. And the concept I use, it’s easier to work on round numbers if you are earning a hundred thousand pounds in the UK your deductions, your actual rate of tax will be around 35%. So still that’s like, I might as well be saying like bananas to a client, but if we put that in terms of time, that’s like saying, Hey, look, you’re gonna work for four months, first four months of the year, you’re gonna be working for free because you’re gonna be paying your taxes. How does that sound to you? And it gets people really sort of tuned in to thinking, oh, okay, yeah, look well I wanna be in control of how much time I have during my career and also in retirement. And therefore actually, yeah, we wanna try and really sort of pay our taxes but minimize what we’re having to pay there. So yeah, it’s a huge, huge proponent of the value that we add for our clients.

 

Steven (03:33):

Geez, Aaron, I love that framing that you give to clients. I’m furiously taking notes here because again, regardless of we’re talking pounds or dollars or which tax code we’re basing this on that idea of translating this into time. Cuz you’re spot on that nobody understands percentages. But I think you’re right too that even dollar amounts especially if we talk about here, hey, you know, here’s the amount you’ll pay over the entirety of your retirement. Like that can lose perspective for some people. But boiling it down to time I really like that my podcast host on the consumer facing podcast I do, Benjamin Brandt, he likes to talk about what your retirement tax bill is going to be. And that immediately comes to mind is the next iteration of that, of let’s calculate your retirement tax bill. And then let’s figure out for you, how many years of your career did you spend just saving up to pay the government during retirement? Because it’s not a small number.

 

Aaron (04:25):

No, no. Far, far from it. And yeah, taxes are a really quite an intangible thing because actually when we go through people’s spending plans with them, say, look, hey, what are you gonna need now pre-retirement and what are you gonna need after retirement? The one expense most people leave out is actually tax. And the biggest expense most people have is tax. So therefore if we can do some planning around to take advantage of the tax efficiencies and the tax sort of breaks out there, legitimate ones because obviously yeah, we don’t wanna hear clients getting in any sort of trouble that then they’ve gotta be looked at. Clients are working hard enough saving the way that to not sort of diminish what they’re earning and get up to get done for tax.

 

Steven (05:13):

So Aaron, as you look at how you serve your clients, has taxes always been a part of the equation? I honestly, I’m not really familiar with the financial planning world in the UK. Here in the US, I’m constantly banging this drum of advisors need to do more around taxes. Are you the exception in the financial planning world in the UK of this focus on taxes? Or is that just more common?

 

Aaron (05:33):

I think it’s becoming more common. I can even speak to our practice. So it’s me and my business partner certainly the clients that we work with, taxes just a bigger concern for what they have. So typically my business partner, he works with professional athletes, so tax is a huge thing, for them. I typically work with entrepreneurs and people in the creative arts, so typically people who are taxed quite heavily, but I’ve gotta give kudos. Actually it became more of a focus when I looked at our practice. We’ve got a great opportunity and so your brother’s work really sort of opened my eyes up to think, oh, hold on, it’s just a process thing that’s getting in the way here. So why can’t we have this process in our business? And yeah, we’ve really been able to just say, well, hold on a minute.

 

(06:21):

Look, don’t just judge us on one thing anymore. There’s so many ways we have add value, whether it’s helping you to sort of retire successfully and not become broke within a few years of your career ending. Look, we really want to help you minimize your lifetime tax bill because ultimately that just expands the number of years of your income. It’s no-brainer. And actually if we are doing that, then great news, we are giving you every opportunity to pass down a legacy to your loved ones. So it was just a no-brainer. Could I speak to how we do in the UK? I don’t know. We do have different sort of tax opportunities here, but certainly if we just think of our practice, I’d say it is a real, one of, three core pillars now within sort of financial advice and planning that we have within the business.

 

Steven (07:11):

That’s awesome. Aaron. I mean, a couple things really stood out to me in there. I’m not offended at all that you’re gonna throw out my brother on my podcast. I’m actually quoted in his book, so we’ll take the shout outs from Matt all the time. Although it probably does make us Jarvises probably a little too, pat ourselves in the back. Too often,  when we get international praise for what we’re doing as well. Matt’s actually going to be speaking at a financial planning conference in the UK later this year. But I’ll let him announce that one later on. If you don’t have Matt’s book already for listeners theperfectria.com has the newest division of that available. But that aside, there’s a couple of things you just said that really stood out to me of again, that crosses borders, that crosses oceans here of your focus.

 

(07:56):

What I took out of that was your focus isn’t, hey, let’s stick it to the government. Maybe that’s a side benefit, but your focus is how do we help clients leave a legacy? How do we help them enjoy more of their retirement? How do we help them accomplish more of their goals? And that resonates with me so much because while it might be more attention grabbing to have articles or content on social media that talks about not tipping the IRS, at the end of the day, this is always coming back to how do we help the client live their best life, have their best retirement. They only get one and the more they’re paying to taxes, the less they are doing to accomplish whatever other goals they have.

 

Aaron (08:34):

And it is so true. Certainly if I think of my business partner he has this niche and this statistics, you can process statistics all over the place and it actually, it doesn’t matter whether you are a soccer player, as you say, or whether you are an NFL player. The stats are there. These are people who’ve been working really hard for a short amount of time and the stats are, they’ll be bankrupt within a few years. So actually our role and our job is to really get them to, in a position that they’re not another statistic frankly. And, thankfully we are really quite good at doing that. And actually, conversely, while we wanna try and mitigate and minimize the amount of tax you are paying on an annual basis, we want you to actually pay tax for a very long time.

 

(09:20):

Cause that means you’ve not burned through your assets. You’ve still got that lifestyle there. So it’s a really interesting point. And then on the other side, on the entrepreneurs we deal with, it’s just mind blowing. When you sit down with a business owner really hard, like literally blood, sweat, and tears built up a business, sold it for an incredible amount only to have to pay a ridiculous amount of capital gains tax. And you think, wow, hold on a minute. You’ve paid all of this corporation tax, you paid all of the income tax, you probably paid our equivalent of sales tax as well along the way. So it’s a real pain point that we can help sort of soften and turn into something quite positive.

 

Steven (10:00):

Aaron, what I think another thing that would be interesting to talk about that’s not gonna be tax code specific is how you communicate these complicated topics to clients. I’m gonna selfishly bring up the fact that before we hit record, you actually have a copy of my book, which is clearly written around the US tax code, but still is really based on these overriding principles of how do we get people aware and taking action on taxes regardless of which tax code we’re talking about. So I guess how is that developed over time for you of how you take these complicated issues and boil ’em down to a point where clients are willing to take action?

 

Aaron (10:35):

That’s fantastic question. Steven, and to your point, there’s only one real massive difference between our tax codes. And I think that’s the ability to do things like UCDs from R&Ds. We don’t have that, but apart from that, we have all the same principles of tax deferred. Tax exempt. You have a 401K, we have an equivalent, we have an equivalent of a Roth IRA. So we’ve still got the same building blocks. Ultimately what we are trying to explain to a client is when it comes to tax and tax relief, you’re gonna have to pay tax at some point. Our job really is to make sure that what you are doing is we within the sort of the framework of goodwill of our tax code is to make sure that you are not getting clobbered and pulling out money at the wrong time and seeing your hard-earned wealth just being fritted away.

 

(11:26):

So quite frankly, the way we’ve started to position it with clients is to say, look, a lot of this stuff that there is gonna be lingo and jargon that we’re gonna use. What we’re trying to do is effectively make sure that you are not leaking tax, you’re not hemorrhaging tax, keeping more money in your pocket. And what we have to do is essentially go through quite an audit now of all the areas that we think we can save you tax. We position it like that with client and we’ve only just started really rolling it out to this sort of structure, but it’s worked. It’s working incredibly well with existing clients and new clients where they’ve bought into this like a wealth planning audit that we are doing. We’re going, look, here’s everything that you should be aware of that’s appropriate to you. And here’s what we’re doing about it, let’s get it done.

 

Steven (12:16):

I like that you mentioned existing clients in there because that’s sometimes a little bit of hesitation I’ll get from advisors about really upping their game on tax planning or getting tax returns from their clients as they’ll say, well what about my clients I’ve been serving for 5, 10, 15 years? What are they gonna think when I just suddenly started doing this? Well, aren’t they gonna be upset that I never did it before? But I like how you’re framing that of just, Hey, great, this is just a value add. We’re gonna bring you, we’re gonna go back and audit what’s been going on, or we’re gonna get this up to date for you of just saying, Hey, this is a way that we’re gonna deliver value. Cause we’re always looking for ways to deliver value. That’s a great way to frame that.

 

Aaron (12:51):

Yeah, absolutely true. And it’s something when we’ve certainly started looking at surge and whatnot that we really need to serve our existing clients. Fantastic. We’ve got a process and a structure to be able to support our new clients that we’re taking on. But look at our existing clients. I think they’re sort of kind enough to us to appreciate, look, we are gonna be evolving as a business. We’ve been doing a standup job to this point and we’ve sort of bought with that sort of trust element that we’ve built up over time that we’ve got the credit to be able to say, look, hey, we’ve got some new things we can bring to the table now and this is only gonna help to benefit you going forward with the audit.

 

(13:30):

The one thing I have no sort of qualms about bringing out the smallest taxes right through to the biggest tax breaks. Because actually one of the key things certainly, I pick it from what what you’ve written about in your book and your content, Steven, is, you know sometimes it is great to sit down with a client and show ’em a big home run of saying, what we’ve saved you this amount of tax by doing one action. But, really that doesn’t happen too often. It’s doing the small things consistently over a number of years that get you to the point of it’s like, whoa, that’s had an incredible effect. And so therefore we realized it had to be systemized. And you know what, we can build processes in-house to say, well there’s an equivalent of a rough IRA and there’s a subversion of the Roth IRA you can take out now up to age 40. Yeah, it’s only 5,000 pounds, but it’s a thousand pounds tax relief. Let’s make sure we’re covering that because if we’re not, you could sort of say, wow, we’re not really sort of doing the flourish up that we should be on this.

 

Steven (14:32):

Yeah. Sometimes people I think lose sight of that, that maybe some of these activities on their own seem smaller, inconsequential, but to the client, they’re not inconsequential and over time they’re not inconsequential. So I would imagine it’s very similar in the UK. Taxes are very emotional for people. And so when they see, oh geez, I had to pay an extra $500 in taxes this year and extra a thousand dollars in taxes. This is real money that has real emotion and tied to it. And then if we can help ’em with that in one year, let alone over the next 20 or 30 or 40 years, I mean, we’re talking about real numbers. So, yeah, I reinforce that all the time. And this is consistent action over time. It’s not the big home run all at once.

 

Aaron (15:08):

Absolutely. And, therefore it’s huge value that you can add to your clients over a multi-year tax strategy. And, like you say, if it can bring forward retirement by a one year, that’s a hugely powerful piece of value that you can deliver to a client and just literally consistent small little tax planning bits. And there are opportunities that you can do. Like for instance, there are things in the UK that’s essentially for the right type of client profile, you could draw out six figures and offset this with tax breaks where essentially you’re not paying any income tax. Your effective rate of tax could come down to zero. But predominantly that’s sort of at the end of the road you can start bringing that sort of value in. It’s when you can sit down with someone and say, look, you can retire now and actually you’ve got all of this tax-free income we can use up first.

 

Steven (16:06):

Yeah. I certainly don’t want to ignore those high dollar tax plan opportunities. But you’re right. What’s more gonna be more impactful for more clients is just those consistent efforts. And I love that, again, you’re tying it back to goals for a client whose ultimate goal is to retire as soon as possible or it’s to take that extra trip with their family or whatever hobby they’re trying to pursue, but being able to tie,  we helped you with these tax savings that contributes to whatever goal you’re trying to accomplish. We like to call that the dishwasher rule of making sure that you’re letting your clients know the value you’re providing so they see the benefit that you are giving to them. Love how you’re approaching that.

 

Commercial (16:42):

Prospects walk through your door for investment advice, but they become clients because of the tax advice you provide them. If you are a financial advisor who struggles with implementing key concepts of tax planning for your financial advisory clients, and on September 27th through the 29th, you will wanna be at the live in-person event hosted by Retirement Tax Services in Las Vegas, Nevada. Register now at retirementtaxservices.com.

 

Aaron (17:09):

And that’s just great business sense as well though, really, like just to my mind to be able to sit down with a client and say, look, here’s everything we’ve done. Not to the point where it’s sort of over sensitive, but to be able to give someone a breakdown and say, Hey, here are all the things that we are looking through for you, and here are all the things which are relevant. And actually we are doing this when you’re at home sort of doing life. We are on the lookout for you. So yeah, it’s, super powerful.

 

Steven (17:36):

Yeah, absolutely. And I hope that one of the things that this conversation illustrates for the listeners is that taxes is really this universal value that we can provide to our clients. And so even if you never plan on doing anything in the UK my takeaway for US based advisors is that tax planning is always gonna be there. The tax code in the US could change a hundred percent tomorrow. Like literally Congress could change their minds and just revamp the whole thing. Tax planning will still be there. And so taking the time to intentionally incorporate this into your planning process to have this in a way that your team can help, that it’s built into your systems, that’s gonna just perpetually provide value within your firm to your clients, you’re gonna always have this opportunity to come back to your clients because taxes come back up every year. Taxes change over time that, like, I don’t know that there’s another example of a planning concept that’s so universal in how we can benefit clients.

 

Aaron (18:31):

Absolutely. It’s interesting you say that, cuz tomorrow our government is announcing our budget where typically tax rules are changed. The retirement account rules are a due to change. And again, like what they were compared to say 10 years ago, we’ve had a whole heap of changes. We had our version of Secure Act 2.0, whereas effectively overnight the government got rid of RMDs and that meant people were pulling out the whole of their retirement fund and paying the highest rate of tax. So, again, that’s why tax is so important because poor tax planning can be the thing which really blows up a successful retirement not to even sort of start thinking about being poorly allocated in your portfolio. But, yeah, getting it wrong, it can can ruin a retirement.

 

Steven (19:18):

That’s a great reminder in there, Aaron. A lot of times our, even my conversations around tax planning really focus on what do we proactively help our clients do? But also, there’s this important element of what do we proactively help our clients avoid? How do we make sure that they’re avoiding those tax time bombs, however you wanna phrase it. But there are certainly huge mistakes that can be made that are costly, that we’re ultimately providing a lot of value to our clients, both in the things we proactively help them do that they wouldn’t have otherwise. And then being able to help them avoid some of those really costly mistakes.

 

Aaron (19:51):

One of the big costly mistakes that can be avoided certainly by financial planners is really being on the front foot to work with the client and also their accountant, but very much to sort of approach an accountant with the view of saying, look, we want to work together very much harmoniously. This isn’t about us saying we are gonna come up with these things and sort of dismiss what you’ve done. So essentially sort of coming in friendship and getting that side of things right can work wonders for clients. Whereas actually if you’ve got your accountant and your financial planner and all of the professionals not talking to each other again, that can cause no number of issues. And again, it can affect ultimately what we’re trying to plan for, which is a successful lifestyle, successful retirement.

 

Steven (20:38):

There is a part of me that feels a little bit better knowing that while accounting is pretty universal, the world over this disconnect between financial planners and accounts is pretty universal. Someday I’ll figure out how to mend all those relationships, but we’ll have to take ’em one at a time.

 

Aaron (20:54):

It is interesting. I think a big part of it comes from the role of the financial planner saying, Hey, look, how can I help you? We are here, we’ve got this client that we are both working with and we both have a vested interest in, but ultimately look as the financial planner, let’s take ourselves down a peg because we know ultimately the value that we can bring. But the accountant really gives us a sort of a segue into to the nuts and bolts of what could be going on that we may have missed and therefore just gives value to a client if everyone’s singing off the same page. And then it gives you the ability to confidently say to the accountant, Hey, how about this is a tax planning angle. Now if we’re saying that and we’ve sort of approached it from wanting to work together then you are gonna get the accountant say, okay, we could look at that rather than say, Nope nope. And starting hitting the client over the head with, but your tax is this, your tax is this. So I think that is a lot of work that financial planner can do and is serving the client. It’s delivering value by having that sort of mindset when working with with accountants.

 

Steven (21:58):

Yeah. Ultimately it all comes back to how do we serve the client? And I think you’re absolutely right. There’s a lot that financial advisor can do. And that’s not to say that accountants shouldn’t take responsibility, but let’s just accept what we can have an impact on. And so I love the financial advisor taking the lead and saying, okay, how do we work together to serve the client?

 

Aaron (22:16):

Absolutely. Cuz this is the nature of a financial advisor. We will come out with some pretty sort of aggressive strategies that again, we want to work with an accountant on. And if I’m an accountant for the first time, hearing someone like me saying, well, hey look, I’ve got a strategy where we can completely sort of offset any income tax that the client’s paying. I’d be like, well, hold on a minute. Can we take it back a step or two? Can we, sort of at least go for it, get to know each other phase?

 

Steven (22:47):

Yeah, definitely. Building the relationship is certainly important. Well, Aaron, I know you listened to our friends over The Perfect RIA podcast as well and you obviously tune into this podcast. So you know, we’re all about recommending actions because information only has value if we take action. So as you think about our conversation today, Hmm, what are actions you’ve taken that have improved the value you’re delivering through tax that you can recommend to your listeners?

 

Aaron (23:10):

Oh, absolutely. So the first thing is to really think about tax planning as a multi-year tax strategy because we have deadlines each year that we will work towards, but hey, let’s think about this as a multi-year strategy and what is it we are ultimately shooting for with the client really is a successful retirement or preserving that wealth, making sure they’re not eroded. So, having that bigger picture in mind and then when we are doing the nuts and bolts to have a process, to have a checklist can recommend your 37 Point Checklist which we’ve gone through is fantastic. So having that keeps you honest. And if you’re doing those two things, then pretty quickly you’re gonna be showing your client not only value because you’re showing a sort of intentionality and being proactive, but you’re gonna start saving a client quite a lot of money.

 

(23:59):

It almost becomes quite addictive in a way. How many ways can we sort of make our clients’ lives easier, make it easy on our practice and find all of the ways that we can say, Hey, look, if you thought about this as a tax planning opportunity, good example. We, I’ve found a little tax break where once you receive state pension, so the equivalent of your social security, we have a secondary, like a secondary tax called national insurance in the UK. Well that’s exempt. You are exempt from that all of a sudden. So you are only on the hook for income tax. Again, you might have someone who’s got a large family investment company or something of that. You can all of a sudden get to the point where they can offset all of their corporation tax and really good things where they’re like, Hey, you are working for me here.

 

(24:46):

But to bring it back there, anytime you come up with a tax idea, you’ve gotta think, well how am I gonna implement this with a client as well? Because what’s one thing saying, well, have you thought about this, but that works’ gotta get done as well. There’s probably quite a graveyard of tax ideas out there where, Hey, have you thought about this tax? It has not been implemented. So just think how you’re gonna be able to get that through. So the takeaways I’d give is multi-year tax strategy a checklist and a strategy for how you’re actually gonna do these things you’re recommending to your clients.

 

Steven (25:19):

Yeah, Aaron, those are great recommendations. Really appreciate that. And pretty, when listening who doesn’t already have a 37 point checklist, you can go to retirementtaxservices.com and get your copy. It’s available for all of our members inside the member portal. Aaron, really appreciate you coming on the show today. Thank you for giving me your time.

 

Aaron (25:34):

And also get your book!

 

Steven (25:36):

And the book, of course the book Don’t Get Killed on Taxes available on amazon.com or for my brother Matthew’s book Delivering Massive Value, you can go to theperfectria.com and get a copy of that as well. But Aaron, really appreciate you coming on the show today. It’s been a pleasure having you on.

 

Aaron (25:49):

Brilliant. No, thanks for having me. I really appreciate this. Thank you Steven.

 

Steven (25:53):

For everyone listening until next time, good luck out there and remember to tip your server, not the IRS.

 

We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.