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Steven (00:52):

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 joining me on the show today is Emily Millsap from Avanttax and we are going to talk today about the importance of tax planning in a client’s life and talk about some stories of how this plays out in real life. So Emily, welcome to the show. Thanks for being here.

Emily (01:13):

Thanks for having me. I’m excited to be here.

Steven (01:15):

Yeah, of course. I always love talking to people who are also taking this emphasis on tax planning and taxes in a client’s life because here at Retirement Tax Services, we spend basically all of our time working alongside financial advisors to help give them access to collaborative tax preparation and tax planning so that they can provide that more full service for their clients without having to become tax experts themselves. So as we dive into this, give our audience just a little bit of background on who you are and what you do and why it was important for you to end up in a place where taxes were valued.

Emily (01:49):

Yes, thanks so much. So I’ve been in the industry about 24 years now. Started as an advisor, been in leadership for a while, spent some time even as just a focused financial planner, and one of the things I noticed throughout my career was that clients tended to look at their financial lives in a very siloed approach. So they’d take one piece to their CPA and just talk about taxes and then they’d take another card to their financial advisor and just talk about the investment piece. And insurance was its own separate conversation and it just was really very siloed and I always as a financial planner would try to bring their CPA, their estate planning attorney, everybody to the table, let’s all talk, let’s make sure that we’re looking at everything in a really holistic fashion and so fast forward me landing at Avantax and finding this firm. We start with the relationship with the client and the CPA or the tax professional and help bring wealth management solutions to the table. So we’re starting from a place of collaboration and cooperation and looking at the picture as a whole and I just think that’s a really great place to start.

Steven (02:54):

So talk a little bit more about what that actually looks like in practice at Avantax. Is that when you say that you start with that collaborative relationship, is that CPAs in-house or you’re going out and working directly with the CPA? The client already has? Just logistically, I get so many questions around this stuff. I like to be able to give people really good specifics.

Emily (03:13):

So we have two different channels that we do this. We have a Avantax Wealth Management, which works with firms that have tax in-house and also have a wealth management financial professional. So we’re the broker dealer, the back office for them. And then on the other side we have a Avantax planning partners, which is our RIA side, so a CPA firm who doesn’t have a wealth management person can use one of our in-house wealth managers and then my financial planning team to build all of the plans. And we’re also serving as a really great succession plan. As we all know, our industry is aging a bit, succession planning is a pretty big concern, and so for advisors who are wanting to sell their practice and have that great collaboration between tax and wealth management, we can serve as a succession plan solution for those advisors as well.

Steven (03:59):

Interesting. So definitely a lot of different options there as far as what’s available, which I love hearing that because I’ve been talking about a lot on the podcast recently just because I hear from advisors all the time and in my work I do directly with taxpayers, I also hear from that side of taxes are becoming more of the expectation as far as what is included in a financial planning conversation. Well, I totally agree that the client’s default approach is that siloed approach. I think even clients are starting to subconsciously let this bleed over into other areas of their life, and I’m starting to see this as I get questions into, I hear questions from advisors that a client is recognizing they need help on taxes and they’re not sure who to ask. And so they’ve kind of taken that one baby step of, I need to ask more questions on this, but they’re taking it to the wrong people at times, which means if they’re not working with an advisor or a CPA or an attorney who is proactively helping with that collaboration, it’s just not going to happen.

Emily (04:52):

Correct. Yeah, I agree completely.

Steven (04:55):

So one of the things I love being able to talk about Emily, is just success stories of what this looks like in practice when we’re able to have these collaborative conversations when we’re able to include taxes as part of the discussion, what are the positive outcomes for clients? And I know that we are ready for the show that you had said that you’ve got some that just top of mind. I’m sure you have countless, we could spend hours here, but for the sake of time we’ll narrow it down to just a few. So what comes top of mind for you as far as client success stories when it comes to incorporating taxes?

Emily (05:21):

Yeah, I think it’s learning how to have great conversations with clients to understand what their near-term and long-term goals are and a Roth conversion story that’s always a great one is do Roth conversions make sense? And we can take a look at the taxes now and the taxes later. So if we do some Roth conversions that’s going to have a taxes now impact. It’s also going to have a taxes later impact in the form of reducing those required minimum distributions. But in a case where a client also has significant charitable giving intent at end of plan, that’s something we want to talk about. Does it make sense for us to go ahead and pay taxes? Now if our intent is to leave a significant gift at end of plan because maybe then we preserve those qualified dollars and we build them in as a charitable gift at the end and through the financial planning process, we can run those as different scenarios. So what if we do the Roth conversions? What does that look like and what if we don’t and what’s the tax impact now the tax impacts later in the tax impact and end of plan and so many people will just jump right to, oh yes, absolutely, we can do Roth conversions, but they don’t take that extra step to understand the client has charitable intent at end of plan that may really have a significant impact on do we even need to worry about paying these taxes? We’re just going to shift those dollars

Steven (06:38):

Yeah, I really appreciate you highlighting that. There’s so much power in asking great questions and it can be easy to get focused in on things we’ve seen work before or things that apply to a lot of our clients. I’m a huge fan for everyone at least considering Roth, but I fully accept and have worked with clients where I say, you know what, Roth isn’t the right answer for you right now, but we’re only going to know that if we ask those additional questions. And those questions are more likely to get asked and answered if again, if we have that good collaboration if we’re not just working in a silo. Because I think one of the misconceptions that a lot of taxpayers have, and as we onboard new clients, as we’re working alongside financial advisors, we see this quite often where taxpayers will be under the assumption that since they have a tax professional in their life, that tax professional is both looking in their rear view mirror and out the windshield that they’re looking at what’s coming next. And unfortunately for the most part, that’s not what tax professionals are doing in part because that’s not what they’re asked to do most of the time they’re asked to prepare last year’s tax return and oh, by the way, make my refund as big as possible, which taking that approach can really fly in the face of, to your point, good long-term planning, good legacy planning. Sometimes we want to pay more in taxes now, but we have to be asking the right questions and understanding the client’s both short and long-term goals.

Emily (07:53):

I always tell clients I can’t make very many promises, but the one promise I can make is that the tax laws will go in and out of your favor over the course of your life.

Steven (08:01):

I don’t remember who I originally heard it from, but the idea that the tax code is written in pencil has always stuck in my mind that Congress can and likes to change it as often as they care to. And so we’re going to make the best decisions, the best recommendations knowing what we know now and using the rules that we know now and then we’re going to adjust when we need to because the other thing that we can promise is that as soon as we make a plan, it’s not going to be right.

Emily (08:25):

And I think the financial planning relationship is built on this foundation of this isn’t the only time we’re going to do this. We are systematically and routinely going to revisit your financial plan with the scope of the current tax laws and everything that’s happening in your life and the world around us today to make sure that the plan we put in place doesn’t need any tweaks or adjustments.

Steven (08:44):

Hopefully, I’m never guilty of this, although I’ll let somebody comment if I am, but the double-edged sword of there being widely available content on technical topics like taxes is that some of it’s not great and some of it’s misunderstood, and so I’d be curious to hear from your side how you help clients who come to you with tax ideas that either aren’t a good fit for them or are just so misguided they got it off of TikTok that it’s like, geez, where do we even start with this thing that you just mentioned?

Emily (09:11):

Yes, that is a great question. I’d say one of the easiest ways to sort of put this to rest is to model those ideas in the financial plan. Oh, interesting. So many clients are visual learners and something conceptually can sound great, but when you map it out and show them the math in a visual way, so this idea would have this impact on your plan or we could consider these other ideas as well and here are the impacts that can really go a long way. Then the next step is through that conversation, just making sure they really understand whatever hot tip they received off of TikTok because sometimes we think we understand it, but when you start to put it into practice, there are some nuances that maybe make it not so comfortable for them.

Steven (09:58):

I really like that, especially for advisors who are already using some kind of planning software or I work with advisors who don’t use software but do a really good job of drawing out plans and modeling these things out. You’re absolutely right. People are visual, and so I like that idea of, okay, great, Bob and Sue, glad you brought that up. Let’s just look at what that would mean for your plan. I don’t usually take the step of modeling it, but I like to go through that same kind of thought exercise that you’re describing of what we don’t want to do is immediately or in a negative way, shut down client ideas because then they’re going to stop coming to us with those questions. So no matter how insane the idea is, that comes off of TikTok of I’m going to buy a cyber truck in Puerto Rico, pay 4% tax and get the solar tax credit at the same time. It’s like, whoa, hold on. But the way we handle those things really impacts that client experience, and so I love that added step of not just embracing their curiosity and helping them with the education on it, but then showing them, okay, here’s what that would mean and here’s why. Maybe we’re going to recommend something else.

Emily (11:02):

And just really emphasize in all things, there are multiple ways to accomplish a goal, and so let’s find the one that fits you the best, that aligns with your values that’s going to put your family in the position you want them to be in, and then let’s move forward with that. Best one.

Steven (11:16):

Well, I think a t-shirt I need to get made at some point is show me the tax return or it didn’t happen kind of like pictures or it didn’t happen. The thought in the back of my mind, I kind of have to push down anytime somebody comes and says, oh, at holiday dinner with my uncle or my friend just told me that they do whatever it is. There’s part of me that’s like, well, I’d love to see the tax return because it’s a good chance they’re not really doing that. And if they are, there’s probably a lot of reasons that it’s unique to their situation and not this broad brush we’re going to paint everyone with.

Emily (11:44):

Yep, it is. Everyone is unique.

Steven (11:46):

So Emily, I know you run a team, so how do you make sure that these things stay systematized and consistent? Because it’s a nice idea that we would have all the time in the world that we could sit down with a client for three days on end, understand every aspect of their life, and then be able to make this customized plan. And we do want to make recommendations specific to a client, but we’ve got to just embrace the limitations on time that can go into things. So how do you make sure this happens?

Commercial (12:13):

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Emily (12:34):

That is a wonderful question and I am a process driven creature, so it comes down to having a great process in place. My team consists of 10 planners. They are all certified financial planning professionals. We have a slew of other designations across the team as well, and the way that we sort of scale so that it is sustainable long-term is the things that we can systematize, we systematize. So we use the same naming conventions for how we put accounts in the financial plan. We model some things the same. So we’re always checking in on the risk side of things if they’re young, if they’re a business owner, what happens if age 100 is not end of plan but that day were to be today. So that’s kind of the work today is always our biggest need for life insurance. If we’re near retirement, we’re going to model. So what if you have an extended stay in a long-term care facility and we’ll model a really long state, but then what if that’s only five years, which is closer to the average and what does that look like? And then we always take a look at the estate planning side of things. Are we projecting a taxable estate at end of plan? And then we start to model. So here are some recommendations that we would make. So we check for all of the risks and then we start to really get it personalized to that client. So if they have a child with special needs, we’re going to make specific recommendations around a child with special needs. If they do have a taxable estate and they live in a state that has a transfer tax at death, we’re going to be sure to address both components of that at the federal level and at the state level and what that might look like. But then factor in things like do you plan on moving? Because if we’re going to leave the state, we don’t maybe necessarily have to worry as much about the state tax side of things, but then the risk is what if something happens between now and the time you decide to relocate to another state that maybe doesn’t have a transfer tax at death? Because those things are really important as well. So we systematize what we can and then we personalize from that point forward.

Steven (14:27):

I love that. So we’re creating this foundation of this systematized consistency and then customizing from there. This might seem like I’m drilling in really specifically on a very almost casual thing that you said in there, but I think it highlights the importance of attention to detail and intentionality. One of the things that you mentioned, and you’ve mentioned it really quickly, was naming conventions. People listening might think that’s kind of a throwaway line. I don’t need naming conventions, but you would be surprised at the power that these little things have if you’ll do them consistently. And when you say naming conventions, I think of all sorts of things, how we name accounts, how we name files, when we’re saving things, how we talk about different tax topics with clients. That’s a huge one. The tax code in general is such a mystery to most people that if we’ll take just a few extra minutes and use consistent terminology across our team and then reinforce that to our clients, I love seeing as we’ve worked with alongside financial advisors for over three years now with shared clients and we start to see them say our same language back to us, you can tell that it’s helping improve their experience and outcome because those pieces that are relevant to them are becoming more and more clear. It’s less and less of a mystery, and now we get focus more on the things that are most relevant to them and we can skip past some of the confusion and pain that’s normally there.

Emily (15:44):

And the financial services industry for some reason is incredibly jargon. And so those of us in the industry use all of these abbreviations and jargony terms that clients may not understand. So if we start from, we’re going to call a spousal lifetime access trust, a spousal lifetime access trust instead of a slat. It helps us talk in real words to the client and not things that they’re going to be like, oh my gosh, in this moment of anxiety, I don’t know what they just said, but am I brave enough to ask the question to clarify? Because if we say it, then there’s this assumption that they should know what it is and we would never want to put a client in that situation.

Steven (16:21):

Well, an example that came up recently with a clients, they were looking at their 2023 tax return that we had filed for them, and this is a new client, so we haven’t had a chance to build this foundation of that shared terminology. And they sent us a question and basically said, Hey, wait a second. We did a Roth conversion. How come my tax return has IRA distributions? I didn’t distribute any money from my IRA, and so we took a minute to have this education piece and talk through that of, Hey, totally get where your question’s coming from. Again, we want to reinforce positive and not just immediately harsh on someone’s understanding because taxes are complicated. We talked through from your perspective as the client, this feels like one transaction. I did a Roth conversion and money magically went from an IRA to a Roth IRA, but according to the IRS, this is actually two transactions. There’s a distribution from your IRA and then essentially a contribution that we’re calling a conversion that goes into the Roth IRA, and then we show the client where this comes through on their form 8606 so that they could see that it was all reported correctly. But some of these things that feel second nature to us of, well, of course, I know it’s not really a distribution from what the client’s talking about, but I spent those few minutes and now their experience around taxes is improving as we’re helping them save money.

Emily (17:33):

And it’s just a horrible feeling. I always correlate, there’s nothing in the world that stresses me out more than car trouble. And so anytime I have to take my car into the shop and they’re using terms, I’m like, okay, clearly this is something I should know if they’re using this term, and am I going to be that person? I don’t have any idea of the words that you just said. What does that mean? And can you put that in plain English? And so I’m always really cautious about let’s never put a client in that situation where we’re using our lingo and all of that jargon and making them anxious about wanting to clarify or feel like they missed an important piece of education along the way.

Steven (18:08):

In my experience, since you use the car analogy, in my experience, clients just aren’t asking the questions as opposed to struggling their way through what might feel like a dumb question because most of us have probably had that experience of sometime or another of going to the mechanic and trying to replicate the sound that our car was making or trying to figure out the difference between a bang and a clank and a ding and all these different things, but there isn’t really an equivalent on a tax return. Nobody has tried to make the sound of a Roth conversion before, and so we should make one though. Well please, yes, we’ll start a whole podcast on tax returns sounds. But I think that what that leads to is people just not trying. They just go on in confusion. And if your clients are confused about their tax situation, they aren’t going to be as willing to engage in tax planning. They aren’t going to be as likely to follow through on your recommendations. Things are more likely to get messed up because they don’t even feel comfortable asking the questions because no one’s given them a safe place to do that.

Emily (19:04):

But what they might do is then seek another professional that’s going to create that space for them to have the understanding or ask those questions. And I think if we create that space upfront, say, I want you to be absolutely confident and comfortable to ask me any questions. If I use words that sound fictional or made up, call me out on it. I try really hard not to do that, and that gives them permission. So even sometimes if we just set the stage, this is a safe space, ask all the questions you want, they’ll feel confident and comfortable to do that.

Steven (19:33):

Which is why we see so much power in so many positive results from advisors who will ask prospective clients, Hey, what did your current advisor say when they looked at your tax return? Because it’s a simple way to illustrate to a client, oh wait, I don’t currently have someone in my life who is asking me those questions and helping me understand those things. So this can be one of two things. This can be that you are creating that experience for your clients and they’re having a better experience and you’re doing a better job bringing on new clients because you’re asking prospects that question. And if you are not doing that, you run the risk to your point that some other professional is going to at some point. What you don’t want is for another financial advisor who listens to this podcast to say to one of your clients, Hey, what did Emily say when she looked at your tax return? And the client go, oh wait, Emily’s never asked for my tax return, which clearly would never happen to you because you’re in the depth of this, but that happens all the time.

Emily (20:21):

Yes, it happens all the time. And there’s nothing that my team loves more than getting great tax returns right up front at the start of the financial plan because there’s so much really important information in the tax return, personal turn, business return. We want all of them.

Steven (20:38):

Yes, I appreciate you echoing that. I talk about that often on the podcast. You’ve got to get every tax return every single year. It makes such a difference. Emily, on this topic of processes, I like to make sure people really understand the details of how this stuff works. Huge fan of processes. This seems to go in tears though. You have people who don’t really spend time on processes, which hopefully we all can agree that’s not the answer. Then you have people who will spend time on processes to create ’em. And then I think this is what separates the good from the great is the good are creating processes and then just using the same process forever. And so the way you’re talking about processes, I’m going to go ahead and bet that you’re more in the great category. So tell us, how often are you revisiting and revamping or tweaking, adjusting your processes? What does that look like?

Emily (21:22):

Oh, that’s a wonderful question. At least twice a year we comb into some part of our process as a team. I don’t have all the great ideas. There are 10 people way smarter than me on my team that I get the privilege to lead, and I want their thoughts and I want their feedback because some of them have been with the firm longer, and some of them have been at other firms, multiple firms. And so we always have the bias of the way we’ve always done it. But when you’ve got a blended team of people who’ve come from other ways, there are multiple ways that we’ve done it. And so I start at the beginning of the process with how my team gets the information for the financial plan, what’s working well, what’s not working well? What are the things that we can improve? What are the things that are maybe a longer runway to improve that we can start now making some small changes on? And then we go into the process of building the plan, and then it’s all of the follow-up components. So we do a really great thing with our financial plans before we go live and present it to the client. We have a preview meeting with the CPA and the financial advisor where it’s like, alright, here’s what we built. Is this the story we want to tell? Are there any tweaks or adjustments we need to make? And so it gives us a chance to do kind of a dry run internally, so to speak, before we go live with the client. So we even talk about that preview process and are we getting those scheduled? How often are there any hiccups with that? Are there any surprises that come up in the previews where we could improve our data gathering process early on to resolve that issue? So at least twice a year we comb into some part of our process and really pick it apart as a team. Everybody has a different perspective and a different opinion.

Steven (23:01):

Yeah, absolutely. Geez, I love that recommendation. I don’t know what the perfect cadence is, but I love that you’re doing it multiple times a year. I love that you’re involving multiple people and then really want to highlight that preview that you do because this is something that it might seem to people listening, it might seem more intuitive to do that with something like a client meeting. So, okay, of course we’re going to do a practice client meeting, but those are really things that you should do with any process. Have your team test these processes out, not on a real client so that if something goes wrong, you can catch those internally. But that’s how you really know if these things are going to work, especially if you’re automating anything or doing anything in bulk. Have team members do this for their own situations. Let’s see how these things really work before you start including clients.

Emily (23:44):

That way we can knock out the pain points early, get it really polished and flowing really smoothly before we go live.

Steven (23:50):

Absolutely. Well, Emily, I certainly appreciate your perspective and your willingness to share the great things that you’re doing. If people want to learn more about what you or the team at Avantax are doing, what’s best way to find more?

Emily (24:01):

So you can reach out to us at Avantax. We are pretty active on all the social media platforms. We’ve got an amazing revamped website that we just rolled out, so you can check us out online, but we’d love to help and chat with you. So reach out to us anytime.

Steven (24:14):

Perfect. It certainly is so important to always be learning more, not just about what the latest tax code is, the latest tax law change, but learning from what other people are doing, what’s working well, learning what resources are available if you’re looking to collaborate or expand the services that you’re offering. As we get ready for this coming filing season, we are expanding the number of advisors that we’re working with at retirement tax services. So if you’re looking for a partner when it comes to tax prep and planning, go out to retirement tax services.com. We’d love to hear from you. Again, Emily, really appreciate your time. Thanks for being here today. We’ll look forward to the next chance that we have to talk.

Emily (24:48):

Sounds great. Thanks for having me on.

Steven (24:50):

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