Read The Transcript Below:

Steven (00:55):

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 building on a theme over recent weeks, I once again have a guest that I have actually met in person, which is fun in these virtual days. Brenton Harrison is also a podcast host, a financial advisor in someone out there talking to people about taxes. So I’m excited to welcome to the show and talk about taxes Brenton, welcome.

 

Brenton (01:21):

Thank you for having me.

 

Steven (01:22):

So, Brenton, we had a chance to meet at FinCon, which for anybody listening who produces any kind of content, that’s podcast, blogs, YouTube, whatever it might be, FinCon is a fantastic conference. It’s one of the few that I go to strictly as an attendee and I just really enjoy it, go and learn from people like Brenton and I got to have an extra kind of fun life moment as Brenton kind of generically talked about someone on LinkedIn he followed that he got tips from, and then when someone asked a question, he’s like, well, actually it’s Steven Jarvis, sitting right back there. And my 12-year-old was blown away when I told her that story. So Brenton, thank you. You made her day. 

 

Brenton (01:58):

Hey, if I can make you look a little bit cooler in front of the kids, I’m happy to do so.

 

Steven (02:03):

Well, I appreciate it. So Brenton, your podcast, New Money, New Problems, you cover a whole range of financial topics including taxes, but really you’ve kind of carved out this niche working specifically with people who are first-generation higher earners. Is that summarizing that accurately?

 

Brenton (02:21):

Yeah, absolutely. I think that when you look at the content for many podcasters, that ends up being who the content speaks to, but we try to get more explicit in saying this is exactly who we’re designing it for and drawing people in.

 

Steven (02:35):

Which I love that because I think a lot of times financial advisors, CPAs certainly will give their clients or their prospects a little too much credit on what they might know. We have to keep in mind that even people who come from wealthy backgrounds, that doesn’t necessarily mean they were taught well about how taxes work. For example, they certainly weren’t taught in high school or middle school. They probably weren’t taught in college. They’re old and the education has been from financial professional if they’re the rare exception and help them or through painful kind of self-learning and usually a lot of trial and error. And so I love that you just kind of embrace this and say, you know what, we’re just going to meet people where they’re at and help them start with the basics and build from there. And I think it’s something that more advisors could adopt. So Brenton talk about from a tax perspective, what are some of the concepts you start with when you’re working with a new client?

 

Brenton (03:23):

I always try to make sure, and I have my test questions to figure out just where are we starting from. And I think that many people when they’re working with high-income or high-net-worth clients, even if you did not grow up poor, even if you grew up middle class or when you’re an advisor, you have an assumption that the high net-worth client understands taxes as you said. So I always ask, do you know what I mean when I say we live in a progressive tax environment? And you would be surprised how many people who earn 200, 300, 400, 500, $600,000 don’t know what I mean when I say that. And if they say I’m in the 37% tax bracket, they think that they pay 37 cents on the dollar for every dollar that they earn. So you start to go into concepts like, Hey, net investment income tax is something that you are beholden to at your income level. Let’s talk about what that means. And we first, so go from progressive, and then we go to some of the things that’s like, Hey, because you’re above this income level, here are the things you deal with that others don’t. And here’s how it informs things like how you invest. So we always start the conversation with, you earn so much that you have to deal with this, this, and this, and let’s make sure that your plan encompasses a strategy to limit the impact of those items.

 

Steven (04:43):

I really love how you frame that, do you know what I mean? When, because it’s such a great because you might have clients and especially for people listening, you might have clients who come in and say, oh, actually Brenton, yeah, I do. I understand that a progressive system means that’s what I pay on the next dollar in not all of my dollars. And then great, you can go ahead and skip ahead. So now you’re not giving somebody a lecture they don’t need to hear. You’re actually taking the time to figure out where they’re at. And I’m with you that literally this last week I was working with a client who in the construction industry makes over a million dollars a year with their incentive compensation. And until they started working with us, we’re still constantly surprised at tax time of how much taxes they’d have to pay. It was a mystery every single time. And so that’s where we started of here’s how we can adjust your withholdings. Here’s why your bonus isn’t typically withheld high enough, and then we build from there. Of course, we all want to get to the more exciting things, but we’ve got to build that foundation. We’ve got to start small and then build.

 

Brenton (05:38):

Oh, absolutely. You talked about bonuses. How many high-income clients have you talked to who think that their bonus is taxed at a different rate in terms of what they pay for the bonus than they do their W2 salary? It’s like, no, the withholding is different. So we always go into it. I wouldn’t say always, but many of us go into it thinking, when I start working with people who make X, then I don’t have to explain these concepts. I can just get right into them and I can show them how smart I am and in reality that there is some value in not making an ass of you and me and assuming and just saying, you know what, just in case you haven’t heard if you have, it’s a good recap, but if you haven’t, let’s talk about what this means.

 

Steven (06:20):

Yeah, and we’ve talked about on the podcast before, Brenton, I’d be curious if you do this at all. In my experience, most taxpayers, even if they’ve worked with a CPA, have never had somebody sit down and actually walk through their tax return with them. And this is a great way to gauge where people are at with their understanding and to build these blocks and then to have a foundation for years to come as you come back to their tax return, to sit down with them, whether you do this virtually or in-person to flip their tax return around and say, Hey, when we look at line one, here’s the types of things that come through here and then work your way down the tax return. Because again, for most taxpayers, it’s something that no one has ever done for them.

 

Brenton (06:54):

I actually had a moment that forced me to do it because I had gotten lazy in the sense that the more technology progresses, the less work you think you have to do, especially when it comes to reviewing tax returns. So the software is irrelevant, but a very popular tax software that’s out there, I fed it into the system, it produces a report, and the report itself was accurate, but the information that the client gave to their CPA was not. So I just by chance was going through the tax return and I’m looking and I’m saying I actually think that this person’s Schedule C is switched with their spouses. And then when I’m going through, I’m like, now that I look at it, the withholding for this is very different, a complex scenario where I would typically have leaned more on that software to do the work for me.

 

(07:46):

And I don’t even know what possessed me to go through it in a little more detail, but I’m so glad I did because when we went through and they amended their return, they actually ended up getting a significant refund when it was at a time in their life where they really needed that refund. So in addition to me doing the work that I should have done anyway, it was also just a good lesson. And you can’t lean on technology. You still have to make sure your skills are sharp because there’s value you add above the technology as an advisor who stays up to date with tax information.

 

Steven (08:17):

Well, that’s a great example of something you mentioned earlier and you kind of mentioned it just as kind of part of your casually and what you were saying, but impact is what this really comes down to. It doesn’t matter how smart you think you are or even how smart your client thinks you are, this really comes down to what actions are being taken, what impact are you having. And I’m totally with you, the technology’s going to keep improving. I could probably guess what software you’re talking about. There are lots of great platforms out there and they can be great tools, but for a lot of those platforms, I’ve actually even talked to the founders, the co-founders, the people who develop those softwares, and they’ll also acknowledge, hey, this is a tool. Every tool needs a great operator. And you’ve got to make sure to your point that you’re staying in that operator role and not just completely delegating all of your responsibility to a software tool. And that way as software improves, we just elevate the piece that we’re doing as well. But it all comes back to what’s that impact we’re going to have.

 

Brenton (09:11):

I agree, and I think that, I remember when Robo-advisors became more of a thing in the cultural zeitgeist and as advisors, you had people saying, do you think this is going to replace the advisor? And to me, it’s one of those issues where it can, if you’re not showing your true value, if you’re putting the stuff into the software like I was tempted to do in that scenario and then not adding anything on top of it, well, yeah, you can be replaced. You don’t have to. Eventually, that stuff will be direct to consumers and they won’t have to go through an advisor to get this information just like with the RoboAdvisor. But if that five-question survey that you get from a RoboAdvisor before they put together the algorithm for your portfolio was the extent of the value you were adding as an advisor, yes, you’re replaceable. But if you’re doing more than that, then it just becomes a small piece of a full pie that you can give them to add some value.

 

Steven (10:13):

Brenton, I’d have to imagine that especially working with people who are newer to some of these concepts, you probably get a lot of, let’s call them interesting questions. And really what I mean by that is you get a lot of people coming in having just seen something on TikTok or LinkedIn or wherever they just came from saying, and I have the answer, I’m never going to pay taxes again because I saw I can do X, Y, and Z. And we don’t even have to necessarily get into what all of those fun things are. We can touch on a few of ’em, but just in general, how are you handling that conversation? 

 

Brenton (10:42):

I spend probably more time than most researching TikTok and Instagram financial advice. And it’s not because I have an interest in it, it’s because I know that my clients do. And to me, I don’t want to be the advisor who 10 times out of 10 when they bring me something that they found online that they think will work, dismisses it and doesn’t even do them the courtesy of explaining it.

 

(11:09):

Because how does that make me different than anybody else who shouldn’t be trusted? If somebody told you that they could change your financial life and you ask them how and you’re like, oh, don’t worry about it, we’ll get into it later. You don’t trust that person. And it’s the same way that you shouldn’t trust somebody on TikTok who in 30 seconds says, you can do this. You can pay no taxes, it’ll change your financial life. Click the link in my bio for more. Like, well, hold on. I want more information so I make sure that I stay up to date on things like the self-banking concept on things like depreciation and expenses that you can and can’t claim and all these things that may be a good idea may not be a good idea because if my client asks me the first few times, I want to be able to explain what it is, why it’s not possible for them so that on that fourth or fifth time, I don’t have to explain it as much because now I’ve built up that level of trust. But I try to not just immediately dismiss it until I’ve shown someone proof of concept. I know what I’m talking about. I can explain it to you in a way that you understand it. So 10 times later, we don’t need to be having these same back and forths.

 

Steven (12:17):

I love it. That’s such a great response of not being dismissive. And I think you’re absolutely right. That’s where you’re going to have the most impact with your client because you and I, and as we’re at FinCon, we can sit around with other financial professionals and we can make jokes all day about how awful some of this online advice is, but we’ve got to remember that money is emotional, taxes are emotional. And so even if there’s a part of your client that knows that that TikTok video sounds a little too good to be true, it’s still really appealing to think about the idea of not paying taxes. We all are a little bit excited about that idea. And so if they come to you and you just dismiss it out of hand, you’re right, you don’t build this trust, you’re not laying this foundation and there’s probably going to be a part of him that’s like, well, wait, does Brenton not just understand that?

 

(12:59):

Is there a reason he’s not willing to talk about should I go click on that guy’s bio and learn a little bit more? Maybe this guy knows something Brenton doesn’t. Whereas if to your point, if you understand what’s out there well enough to say, Hey, you know what? I totally get where the question’s coming from. I would love to pay 0% tax too, but let’s talk about how that actually works. And really what they’re talking about is this one situation that happened one time and was this perfect storm that’s never going to apply to you. And then you can go down that and then help the client see, oh, okay, I see why you didn’t recommend that to me before. I see why we’re not going to go down that path. Let’s go back to what might feel like simpler things, but the things that have an impact.

 

Brenton (13:36):

Yeah, think about it, even just in terms of pure reach. You see these videos where advisors, financial advisors, CPAs, tax professionals, they will do reaction videos to financial advice from social media. The reason that they chose that video as much as it is good content is because the video has tens of thousands, if not hundreds if not millions of views. So clearly there’s a large base of people out there who thought it was worth watching, who thought it was worth disseminating, and maybe you have a profile that has a thousand followers or 2000 followers from the client’s perspective, who are you to just dismiss it out of hand and act like it has no value when 2 million people thought it did? So it’s like you have to have some humility as well, because when I respond to my clients, you look at my Instagram, I might have 1500 followers and subscribers. I can’t just be like, oh, that person doesn’t know what they’re talking about. They have 3 million followers. So you could at least do them the courtesy of acting like people pay attention to what they say.

 

Steven (14:38):

Yeah, and how crazy is it that we’re having this conversation? I totally agree with you that there is social proof whether it’s justified or not. We’re more and more in a society where there is social proof in how many followers you have and how big your platform is. And you’re absolutely right for people like you and me who are more focused on impact, our clicks just aren’t going to be as high because we’re not going with the clickbaity. You can move to Puerto Rico and never pay taxes again. That might get my follower count up more quickly, but it comes back to impact. And to your point, the trade-off there is that I need to be willing, I need to have the humility to be willing to address these other things that come up and say, Hey, you know what, Mr. And Mrs. Client, that’s a really great question. Totally where that’s coming from. Let’s talk through the mechanics of how that would work. So you know why it’s not currently a good fit for you or however you want to word that in a given situation. There still are some things that I have a hard time not just laughing at when they come up, but I’m getting better and better.

 

Brenton (15:30):

Understood.

 

Steven (15:31):

So Brenton, let’s talk about the progression then. I mean, we start with these simpler things, but as you work with clients, I mean, how often during the year is taxes a topic for you?

 

Brenton (15:41):

So right after filing and then towards the end of the year, we work with several entrepreneurs and we have the conversation of what’s the right retirement plan? Are we going to do a SEP IRA? Are we going to do a solo K? So we have those conversations. We also have really high-income earning W2 professionals and W2 couples who have young kids. So we’re having the conversation around not just the end of the year, but that’s also open enrollment. So should we participate in the HSA, or should we max out a dependent care FSA? So there’s all those concepts that come around the end of the year at open enrollment time. And then after filing, we have the conversation of here’s what happened in the tax year prior, what do you have planned for the year ahead? Because to me, I see several situations where a person might not think about the fact, Hey, I’m leaving this house and I’m going to get a different house.

 

(16:34):

Well, you’ve only lived in that house for two years. Let’s have a conversation about whether are there going to be capital gains. You can’t just have all these major moments that are coming in your life. And because my clients are between typically the ages of 35 to 50, there’s always something major going on in their life. So you want to have an idea, are you all trying to get pregnant this year? Because that’s something that comes up, okay, this might be a year where we need to do this strategy or that strategy. You had a ton of health expenses last year. Have you thought about trying to maybe file separately and then using those health expenses as a deduction for the person who incurred the expenses? It’s not giving tax advice. It’s more so teeing up some ideas so that when they go back to their tax professional, they can just say, Hey, or I could be on the thread and say, Hey, here are some things that I was thinking. I want your perspective as well. But what I don’t want to do is just have the year pass and all these major things occur and that tax professional find out after they’ve already occurred.

 

Steven (17:31):

Well, on behalf of CPAs, I certainly appreciate that you’re being proactive. I love that you have intentionality when these conversations are happening because even though I talk about taxes every single week on this podcast, I endlessly write about taxes for advisors. I do actually recognize that taxes can’t be a constant topic. So what I look for in advisors that I collaborate with is are you having a conversation about taxes at least more than once a year because it can’t just be at filing time. And then I love that you talked about combining it with other life events with open enrollment, taxes are impacted by every money decision that you make. And so the more we can weave these things together, the better outcomes that we can have. I want to ask about, you mentioned in there that hey, maybe you’ll even be on the thread with the CPA with the tax preparer, which I want to pull out a little bit because I hear from a lot of advisors who to make sure that they’re not getting in trouble with compliance, they’ll end any tax conversation with, but double check with your CPA.

 

(18:26):

And in my experience, if you are not actually involved in the thread involved in the conversation, your clients aren’t actually going to ask their CPA. All you’re doing is covering yourself from a compliance standpoint, you’re not having an impact. So I’d love to know what you found successful in building those relationships, to be included in that conversation and not to be dismissed out of pocket because you are not a CPA as A lot of tax professionals will see it.

 

Brenton (18:47):

I show deference to expertise, so I try not to be the financial advisor that emails the CPA and says, here’s all the things that we’re planning to do this year. Come on, have some humility. So I try to make sure that they understand these were some things that came up in conversation, not sure if it’s a fit with other things that you might already have in mind. So I leave some space in the room for the professional to remain in the standing of the professional. I don’t want to put them behind the eight-ball before our relationship even starts. So I will ask if I can have a meeting with them or I’ll send a meeting recap and I’ll include the CPA and just make them aware of some things that we’ve talked about. And then I’ll just say, Hey, if there’s anything that you need my help in implementing, then let me know.

 

(19:35):

And to me, I think just the way that you would treat a person if you treat a CPA that way, then you end up having a better relationship than most. And then there are also some areas where you’re going to need that professional’s help. We’re dealing with a couple right now who is going to have to navigate RMDs, but they have multiple retirement accounts. So to me, I need that CPA to know everything that’s out there because I’m doing them a disservice if I don’t give them all the information they need. And then it’s just a game of either telephone where I’m trying to pass a message through my client that’s going to get distorted or it’s going to end up being me versus the CPA because I’ve put them in a pinch and why would they protect my relationship with them now? So it doesn’t benefit me to do anything other than be communicative and then offer to be that linchpin or that go-between or even the quarterback if it’s taking something off of their plate. But I start with just showing deference to their expertise.

 

Steven (20:39):

So many great things in there. You could just make a checklist right off of that of I love that it still comes back to impact. I mean, you could easily just fire off your email that says, Hey, talk to your CPA because of X, Y, and Z, and you’ve checked the box, but that doesn’t have impact for the client. So by reaching out, by creating a situation where the tax professional can still feel like a professional and not your gopher just trying to get things done for you, the timing is critical. This is coming out in January, but we’re recording this in December and in anticipation of the end of the year, it’s not in February or March saying, oh, by the way, here’s what we already did. I love the wording you had in there of here’s some things that we’re considering, and you might even know going into it. It’s like, Hey, absolutely we’re doing these things, but by having those small intentional wording changes, you’re bringing them to the table and inviting them to be part of the conversation. Cause, you’re absolutely right, there’s going to come a time where you want them to come to the table too, and now you’re building the relationship along the way.

 

Brenton (21:34):

Yeah, I mean, think if you’re on the financial advisor side, how many of us have gotten an email from a tax professional that says, Hey, please send the investment statement tax documents for the tax year 2021? And you’re reading it saying, man, they can’t put a hi comma, I hope you’re doing well. Was that too much?

 

(21:55):

Was it too much to say? My name is, and just do the basics of introducing yourself. So I try to treat people how I would want to be treated. I think a lot of the things that we do in terms of professional courtesy, they’re not even professional courtesy. It’s just courtesy. And you can try to position yourself as this end all, be all advisor, but you’re going to at some point need those people’s help if for nothing else than to just solidify your expertise and submit your relationship with that client. So I try to make it as easy on them as possible to do so.

 

Steven (22:28):

Yeah, and by the way, when we talk about impact in this situation, we’re still talking about impact to your clients, to the taxpayer, and we’re not even talking about very much extra time. I mean, this probably isn’t any extra time at this point because you’ve practiced so much, but when you send these emails, when you’re careful about your wording, it’s just a little bit extra intentionality and it’s making the client’s life better. You’re not subjecting yourself somehow to the tax professional, now you’re treating them as a peer instead of an errand person. And yeah, your client is going to have a better outcome. And at the end of the day, that should be what your goal is.

 

Brenton (23:00):

An extra sentence at the top of the paragraph makes all the difference in the world in terms of how you treat people.

 

Steven (23:06):

Yeah, absolutely. Even that example, which I can totally relate examples that come to mind, even adding an extra sentence of context makes somebody feel like they’re part of the team as opposed to, again, just running errands for you instead of just, Hey, can you send me the statement, Hey, we’re working with the client on their RMDs for this year. Can you send me the statement? And it’s like, oh, now I know how to be helpful and I might know what other information I should provide. Maybe they didn’t even ask for it, but you can say, oh, hey, and by the way, they actually just inherited another IRA that you’re going to need to take a separate RMD for, or that you’re going to need to report a separate RMD for whatever that might be. But it’s going to trigger you to think about other things that you can be helpful with.

 

Brenton (23:44):

Absolutely.

 

Steven (23:45):

I really appreciate you being willing to acknowledge that. Hey, some of this you learned through trial and error. You’re always trying to refine your process. So as you think about people listening to this podcast, what are things that have stood out to you that you’ve done that have improved your ability to work with your clients on taxes or just things in general you’d recommend to advisors who want to make sure they’re having that impact that you talk about?

 

Brenton (24:04):

I would recommend any advisor, find the client they have with the most complex tax situation and just print off the return and a pen and a highlighter and just mark it up and go through the things that you don’t understand and go research those things. And I think that offers a wealth of educational data to just go through and whether you’ve wrote in the CPA and again, show some humility and say, Hey, I’d love to take you to lunch and talk about this strategy. There are things that I find on people’s returns where it is not about whether or not I agree with the strategy, it’s just making myself aware of what they’re doing. And there’s a lot of information in those tax returns where you can think that you know all there is to know which you don’t know everything that a person who does it every day knows.

 

(24:58):

So I do that sometimes if I have someone who has a complex return, even if I think I understand it all, I still will just print it off and just sit with it, even if I’m watching TV while I do it after I put my son to bed and just take some notes and go back and google some things that I may not have a full grasp on. Because the more that I can educate myself on those strategies, even if I don’t agree with it, I at least know it exists. And if it comes up for a client for whom it may be more relevant, I can bring that knowledge to the table.

 

Steven (25:28):

That might be the recommendation of the entire year right there to go find your most complicated client from a tax perspective. I love that. Print it out. Sit down with a pen and a highlighter. Leave Google off at first! I love the recommendation to go research, but go through it and say, okay, what do I really know in here? What would the questions be? What would I be totally lost on that I need to make sure I’m talking to a tax pro about? I would tag onto that, that you need to make sure you do that with your own return as well. If you haven’t done that recently or ever, find your most complicated client and then your own return and do that same thing, which then of course goes into my most constant recommendation on this podcast, which is you need to have the tax returns for all of your clients every single year in part, so you can do things like what Brenton is talking about, but we’ve got to get to the real data. There really is no replacement for hands-on practice for going through the return, making sure you really know what’s in there.

 

Brenton (26:16):

Well, I shouldn’t say I can’t because there was a part of my career where I didn’t focus as much on the tax return, but it was such a lost opportunity to show value in all of those years. And there was a time when I didn’t do cashflow analyses either. And those two things alone can justify the fee. If you know what you’re doing, if you can articulate it well to the client, you obviously do more. But there are scenarios I’ve had with clients where between the cashflow analysis and the tax return analysis and the conversation we have afterward, that’s enough to justify what we charge. So don’t leave that on the table.

 

Steven (26:52):

And if you’re really new to reviewing tax returns, there are plenty of resources out there. Of course, I’m partial to retirementtaxservices.com, but wherever you’re getting your information from, make sure you’re learning from other people who are doing this. Make sure that you are practicing, that you’re elevating your skills, and that you have that impact on your clients.

 

Brenton (27:09):

And when you’re talking to clients or when I should say, when I’m talking to clients, the first thing I look for is if I see they’re self-prepared, I’m like, okay, I can definitely add some value here. If I see they don’t have a professional, I’ll say one of the hardest things for me has been finding consistent help in terms of people to whom I would refer clients, where I’m confident in not just their ability to file a return, but the level of customer service because I have expectations over how I will serve my clients that are not always met by the tax professional. So I also start conversations, even if someone hasn’t filed themselves, but they have a professional with whom they work, I say, how do you feel about them? What’s your relationship like with that person? Are they proactive communicators or are they reactive communicators? You’ll have people who say that they’re frustrated with their tax professional, and then you’ll have a conversation and you find out, well, it’s the client. You didn’t give ’em the tools to do their job. But if they are pleased with them, then I’ll go check out that professional’s website. I’ll see if I can set up a call with their intake person and establish a bond.

 

Steven (28:16):

That’s a great recommendation. Well, Brenton, I really appreciate you taking the time to come on the podcast. Share your expertise. If people are listed in and love what they’re hearing, how do they learn more about what you’re doing? How do they follow along with everything you put out?

 

Brenton (28:28):

So we try to make sure we have consistent content every single week. You and I have had this conversation. So we are on YouTube, New Money, New Problems. The podcast is New Money, New Problems podcast. We’re on all your favorite podcast platforms. And then on Instagram, we are New money.New problems. So that’s the way you can find it, all the things that we put out as a firm. And then on LinkedIn, I’m Brenton Harrison. Pretty easy to find on LinkedIn. If you are searching, I don’t know if we had this conversation, but if you’re searching for me on Google, please make sure you put in Brenton Harrison, financial advisor. Otherwise, you’ll get a very, very different set of Google Results. 

 

Steven (29:09):

And well after your presentation, I did go look at that. That is an unfortunate name association. So yes, go have some fun and look up what the alternate is that he’s talking about. But there are two very different Brenton Harrisons out there. Brenton, again, thanks for coming on. For everyone listening, thanks for being here. And until next time, good luck out there. And remember to tip your server, not the IRS!