Welcome to the Retirement Tax Services Podcast! Steven’s guest today is Frank Murillo of Snowden Lane Partners. Frank has made the journey from a wirehouse to the RIA space. As a result, he confidently provides clients with proactive tax strategies today.
In fact, he recently met a former CPA (client) in his office. Some advisors might have been intimidated. Nevertheless, Frank wound up helping that client understand some things about his Required Minimum Distributions (RMDs).
No one is born knowing the intricacies of the tax code by heart. As a matter of fact, intelligent people have to learn it, too. So, Steven often encounters smart people who dread April as an inevitable, worst-case scenario.
However, if you catch those clients early enough, problems can be prevented. Encourage them to get an early start. The goal isn’t just to be tax-compliant. It’s to be tax-proactive.
Frank’s CPA client had changed jobs. As a result, they were discussing his income changes. During the meeting, Frank looked over his files. Consequently, he found old 401k’s, old IRAs, and such scattered around.
These had all begun to add up over time. In the IRS’ own words, “You cannot keep retirement funds in your account indefinitely.”
Frank’s approach emphasizes helping all clients become more tax efficient. He listens to their financial life story, identifying potential strategies in his head.
They may not see how this adds value at the first meeting. Nevertheless, by the next one, he’s ready to present concrete options on paper.
Steven particularly emphasizes the value of Frank’s check-the-numbers-for-yourself philosophy: Don’t take the client’s word for things. Politely get every client/prospect’s return, every year.
Frank Murillo has had clients remodeling their homes. Sometimes an IRA is their source of income—and they want to make a $50,000 distribution.
Rather than let them get taken to the cleaners, he recommends splitting the distribution. In consequence, this spreads them over 2 different tax years. Sometimes the simplest approach is best.
On the other hand, a private business owner may not have massive liquidity on paper. Nevertheless, their success has put federal and state tax exemptions out of reach.
A client’s passion for their work may keep them from noticing this. Therefore, Frank guides them around these rocks in the water. If necessary, he brings other professionals in to help solve their needs.
Whether you’re meeting with retirees, advising business owners, considering estate ramifications, or something else, this ensures maximum value.
Steven and Frank have a lot more in today’s Retirement Tax Services Podcast.
Thank you for listening.
Steven Jarvis:
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 in this show, I teach financial advisors how to deliver massive value to their clients through retirement tax planning. On today’s episode, I’ll be interviewing Frank Murillo, a certified financial planner in Miami, who is a partner and managing director at Snowden Lane Partners, an independent RIA firm. So, Frank, welcome to the show. It’s great to have you
Frank Murillo:
Glad to be here, Steven, really excited to speak with you today.
SJ:
Yeah, I really appreciate you being here. As we were talking before the show started, one of the things that you said that really stood out to me is that you don’t just want to be tax compliant, you want to be tax proactive. I love that phrasing might have to steal that and put it on things. But I wanted to start by talking a little bit more, you had mentioned that you had spent quite a few years at a wire-house, which I’m sure was a great experience for you, but it’s really only been in the last couple of years in the RIA space that you really been able to kind of explore tax planning as a service you offer your clients. So I’d love to hear a little bit about how that transition has worked for you.
FM:
Yeah, thanks. Um, you know, that transition was very rough at the beginning, in the wire-house world – and I think I’d mentioned this earlier – you’re, managed to the lowest common denominator and it’s almost a sin to say the word tax and almost immediately you’re, you’re taught to pass the buck and consult your tax advisor, which isn’t a bad idea per se. But I think as planners, we’re really missing a good portion, if not half the value we can provide to our clients by not being proactive on SAC strategies. And that’s not saying that we’re sitting there filing returns or, or, or mending 1040s, but I think, you know, taking or quantifying the value of a tax strategy, not just one year, but over several years, if not decades is really valuable to a client. So it’s really just a matter of being proactive and looking for the knowledge that we really weren’t taught to use at the warehouse.
SJ:
Yeah, a couple of great things in there. You certainly want to still consult with tax professionals when, when you get to that end piece and the execution piece of a lot of different tax strategies, but there’s, there’s tons of room for advisors to help identify those opportunities, to help clients understand what the alternatives might be. I really liked how you keyed in on, it’s not just, we’re not just looking at one year, we’re looking at over time because tax compliance is really, really important. We don’t want to diminish that at all, but like you said, it’s not just tax compliant, it’s tax proactive because if all you look at is – what can I do about my tax bill this year? You’re really missing out on a lot of opportunities.
FM:
Right? Absolutely.
SJ:
So Frank, how have you been able to get comfortable or get to a point where you, you are willing to talk about these tax strategies with clients? So just a couple years ago you were deferring any tax related conversations, and now as I get on your website, you’ve got tax articles out there talking about, uh, the tax impacts of RSUs because you work with executives that RSU’s are restricted stock units that’s really relevant to your niche. So how did you get comfortable with being willing to talk to clients in such a short timeframe?
FM:
Uh, well, if you haven’t noticed, I have alphabet soup behind my name, a true nerd at heart. So it’s a lot of reading, it’s a lot of just getting knowledge and attending courses and really just trying to be up to date on all those strategies that we can provide our clients. A number of platforms that have been very helpful with that, which I can expand on if you want, but it’s, you know, you don’t necessarily have to be the master of it all. You can start small and any little nugget of information can be very valuable to a client because you’d be surprised how much they may not be aware of that can provide tremendous value to them going forward. So…
SJ:
Yeah, so that, that last piece in particular, it sounds like you’re saying that you shouldn’t take for granted that the clients are going to understand even simple tax concepts and this isn’t to say that that people are dumb or uninformed, but, you in your profile, you talk about having learned about finances through finance 101 at home, which is awesome that you had that experience. But for a lot of people, even if they do have some tax or some finance background from their parents or people around them, tax often, isn’t a piece of that. So what are some of the things that, that maybe you used to take for granted that clients might know, but that you’ve been surprised that they don’t know about taxes?
FM:
You know, just as you brought that up, something came to mind. I actually have a client who is a CPA, uh, not currently practicing. He works in the corporate environment at the moment. And he was very surprised to see in black and white writing the potential value of his RMDs. And it’s not just at age 72, but it’s, you know, 72, 73, 74. So it really pops up when you put it on paper and you see that your, your distributions might be six figures when you retired. And then the wheels start to turn as to how that could impact them from a tax perspective. So, you know, clients might be aware of required distributions in retirement, but they may not really have a grasp of, of what the, the impact that could affect their retirement, right? So…
SJ:
Yeah. And if you’re not talking to them about that early on, if you wait until they’re 71 and a half or 72 to even start talking about it, you you’ve missed years of planning opportunities. I find that a lot of people assume that taxes are just a reality and not something they can impact. Uh, and if all you do is file your tax return each and only think about taxes in April, that might be true for you. But if you take the proactive approach, like you’re suggesting. There’s so much that can be done to, to help with that situation.
FM:
Yeah. It’s especially, it’s a case where the gentleman was looking to retire early, right? So there are some proactive things we can do, uh, if he does retire early and kind of beat uncle Sam to the punch, right, before he turned 72. So, you know, that that’s a perfect case where the gentleman is very intelligent, very knowledgeable, he has his licensing, but just not really completely aware of what the impact of that would be in the future.
SJ:
Yeah. So, uh, on this podcast, we really want to make sure that advisors can take the information and do something about it. So can you talk just a little bit more about how that actually came up? Because if your client’s a CPA, you probably didn’t just go into the meeting thinking, ‘Hey, I better go over every tax principle with them. CPAs don’t know anything.’ So how did you realize that he had this misunderstanding about RMDs?
FM:
So a big part of my planning process, like a lot of advisors out there focuses on cash-flow and we’re looking at, he actually changed jobs. So he left one company, went to the other, we were discussing his salary, his income and what the change would be for that and I pulled up the planned distributions cash-flow report, and it’s all projections, right? So we have to preface it by saying these are just rough numbers at the moment. But in looking at that he has old 401(k)s, old IRAs that are just scattered all over and you start to see how that potentially adds up over time.
SJ:
Yeah. And so that’s something you sit down and walk through with him in a meeting, or is that something you send to him?
FM:
We walked through it together in a meeting. Yeah. Every, just about every presentation or every report that we have, we’ll sit down and and go through it with the client so they don’t arrive at their own conclusions, right. We want to make sure that they understand why we present this and what the benefit is to them.
SJ:
Yeah. I love that. Switching gears just a little bit, um, we talked about this before the show, but as I get on your website, I love that the, your ‘about’ page starts with, about you talking about your potential clients. It’s just such a cool way to, to really focus, not just on your niche, but to really identify with people of, Hey, here are the, here are the people I serve, and one of the things that it says in there is referring to you – It says ‘I help people like you simplify their finances and answer questions such as are my investments tax efficient?’ So when you’re talking to prospects, how do you help get that point across?
FM:
Well, you know, usually when you sit down with a prospect, they’ll put in front of you, their entire financial life story, so to speak, right, you have a bunch of statements and they’re telling you their investment habits and you know, how they started their career and how they got to where they are now. And in going through that you’ll notice – and any advisor can also just pick up – what basic strategy, asset location, where are these assets being held? Um, are they in the right type of account? And these are the things that are going on internally. It’s not something I’m going to tell a client because it’s not their language, so to speak, right. But as you start combing through the information they provide, you kind of get a feel for what they’re doing and what could be done to improve their situation. And those are all value adds that on a second or third meeting or subsequent meeting, we can sit down and present to them and say, Hey, FYI, did you know that having, uh, such and such investments in this account, isn’t really being beneficial to you and different strategies you can provide.
SJ:
Yeah, it’s definitely really key to be able to see what their investments look like. What things are… Actually have it on paper, because to your point about the CPA who really wasn’t completely comfortable with what their RMDs meant. Just asking the questions and taking someone’s word for it is probably not the best way to get an accurate picture. Having those documents in front of you. I always really encourage advisors to get the actual tax return, both for prospects and clients. There’s so much information you can get there to help guide some of these conversations, even in that prospecting process.
FM:
Hundred percent, Absolutely!
SJ:
So, Frank let’s talk about the kind of real life experiences you’ve had with clients of being able to add value through tax planning. You had mentioned a couple to me as we were planning for this. So I’d love to hear more about the situations where your clients get value from your focus on taxes.
FM:
You know, it can be really simple and really complex. So if you think about it as a spectrum on the simple end, you know that clients who are in the process of remodeling their homes and their source of liquidity is that IRA that they’ve had for a number of years. And they’re thinking about dipping into it all at once. And maybe let’s say it’s a $50,000 distribution. Well, Mr. Mrs. Client, why don’t you take some of that this year, and then the other part of next year? So you can split the taxable amounts across different tax years, right? That’s kind of the really low hanging, simple fruit. On the complex end of things we’ve worked with different types of business owners who may not have the biggest amount of wealth on paper. But due to the value of their privately held business, they’re well above federal estate exemption. So it’s something again where the client is so focused on doing what they love and doing their work, that they’re not completely aware of what the consequences are of their wealth. And it’s really making them aware and then bringing in the right professional self solve they need. And really that one just speaks to, you know, proper estate planning and funding different types of trusts to pass his net worth onto his heirs in a tax efficient manner.
SJ:
Yeah. So let’s go back for just a second to the simple example, because a lot of times the simple are the more common. You know that’s great to be able to work with a client to make sure they’re maximizing their tax opportunities. When you’re doing that with a client, do you have tax planning software that you use, or is this an Excel spreadsheet? I mean, how are you determining; of that $50,000, you know, $17,382 should be in one year and the rest and the other year? I mean, they’re going to want specific recommendations, right?
FM:
Well, that’s why I work hand in hand with their CPA and their tax counsel. I never wanted to spare that relationship, I think that’s invaluable to have, and also is, it’s not just from an advisor standpoint, but the client wants that checks and balance system, right? So if one person is suggesting A, we want to make sure that that’s confirmed on the other side and that it checks out. Also just, for the simple reason that the CPA is the one signing off on the return and not me. Right. So we want to make sure that both sides are speaking to each other. Um, and nine times out of ten, we’re still running by all these items through their, their CPA or their advisor or their tax advisor. Uh, but we might be the ones just bringing up a strategy and not the other person.
SJ:
Yeah. That’s such a great point. Uh, as an advisor, you’re still adding value to your client, even if you’re not the one who finalizes or executes the strategy. Because a lot of times, even if your client is working with multiple professionals, we’ll stick with the CPA example. A lot of people talk to their tax preparer once, maybe twice a year, usually at tax time and at that point they’re usually focused on ‘just help me not pay very much tax this year’. And so even though they’ve spent the whole year talking to a great advisor, like Frank and talking about long-term strategies, they go to their tax preparer and say, I don’t want to pay taxes this year. And so, um…
FM:
And a lot of times it’s too late by that time, right, because it’s a year and there’s not much you can do. So you’ve got to be proactive and start in January, let’s say, right? And, and take advantage of that
SJ:
Yeah, exactly. And oftentimes clients will talk to their advisor more often, they’ll talk to the tax preparer. So the advisor is the one with a better opportunity to identify those things. Uh, and I loved how you talked about working proactively with the other professionals in your client’s lives. Can you talk a little bit more logistically of how that works? I mean, do you… you have all of these CPAs on a list and you call them all up, anytime you talk to a client and say, ‘Hey, here’s what we talked about’? I mean, how does that actually work in practice?
FM:
Yeah. So in practice, you know, as an advisor, you always have an onboarding process, or hopefully you have an onboarding process and through that onboarding process, one of the questions that we ask is who is your CPA? Who does your taxes? Um, and a natural question that stems from that is, uh, what’s the best way to get in contact this person? Uh, can you make an introduction not for the simple reason that a lot of us want referrals or anything like that, but it’s really just to have that communication and that open dialogue with their, with their tax preparer, um, and in doing so we often ask, is it okay if we reach out to your CPA and/or ask the CPA themselves? Is it okay if we reach out to you around tax time, uh, to, to plan for tax harvesting or any other tax strategies, and that’s never been an issue, uh, because they also want to be helpful to their client and provide value on that end as well.
SJ:
So, wait, Frank, you’re telling me it’s never been an issue and you proactively reach out?
FM:
It’s mostly not been an issue or I’ll correct that, you’re right.
SJ:
No, actually that’s not, I’m not questioning whether you’re telling me the truth. I just, um, I hear so many horror stories from advisors of these, these bad dynamics they have with CPAs, but usually the common theme is: it’s the CPA finding something at tax time when the advisor hasn’t proactively reached out. And so I love hearing that you take that proactive approach because the CPAs I work with, I never hear them complain and say, ‘oh, an advisor calls me, called me in June to proactively talk about planning strategies for a shared client.’ What they complain about is, ‘uh, yeah, in March, I suddenly got this 1099 that the client didn’t know about that the advisor hadn’t let me know it was coming and I’d already done the tax return. Now we’ve got to redo it.’ And then I promise you, they’re not giving referrals to that advisor.
FM:
A hundred percent, a hundred percent, again, it’s really, as long as you’re respectful of that relationship and you treat it like you would any other professional relationship. I think it’s, it’s a win-win.
SJ:
Yeah, definitely. Frank, what would you say is the most common, uh, tax, uh, opportunity that you’re able to work with your clients on, that you see value in?
FM:
You know, the really simple, one of the really common one I would say is, is Roth conversions because of the number of my clients are looking to retire early. And maybe it’s not something that we’re doing right at this moment, just because they may be in a relatively high tax bracket, let’s say, but if, if we do help them fulfill their goal of early retirement, it’s a strategy that becomes invaluable and really, you know, indispensable to them. We can visually show what saving thousands of dollars per year over the course of their lifetime can help for their retirement. So I think that’s probably the biggest one. And also it doesn’t have to be too complex. It could be as simple as just helping them make sure they’re maxing out their retirement plan contributions, and if they have access to do so. High deductible health plans and being covered through an HSA, little things like that, that can really add value that they’re not cognizant of.
SJ:
Yeah. I mean, back to the point you made earlier of, you know, don’t, don’t assume that your clients know about all these different things, even if they seem simple to you. I mean, as an advisor or for me as a CPA, I mean, we, we spend, we spend lots of time talking about these different things. And so it can, we can just kind of get into this habit of assuming that since we talk about it all the time, other people must talk about them all the time. People must know what the retirement contribution limits are, what their HSA limits are, but how long would it take in a client meeting to have a checklist. Or in preparing for that client meeting to have this checklist, you go through really quickly to make sure that none of those things get missed and then let the client know you’ve done that for them, even if there’s no changes that come out of it, how much more peace of mind is it giving to the client? If they know that you’re looking at those things for them.
FM:
Tremendous, and it’s really simple, it’s something you do once, you create that checklist and you can use it for your entire book of business, right? So the value there, and it really never stops providing value. It keeps providing value to your clients as long as you continue to do the work.
SJ:
Yeah. I love that. I like how you mentioned being able to use it over and over again, systematizing things is everything. Well, why? Well, I have to go back to the drawing board each time a client is coming in and have to think through, okay, now what was I supposed to look at to make sure that they’re…
FM:
The client experience, as well, right? Because they know that they have confidence that you’ve done this before, uh, that you’re knowledgeable about this and they feel that I think on the other end of, of the desk.
SJ:
Yeah. Yeah. So Frank, both from some of the comments you’ve made in what we were talking about before the show, um, uh, I’m confident, there’s plenty of situations where you’re talking about a tax strategy and you get to a point where it’s, okay, now we need to go talk to your tax professional. Have you ever had a client push back on you or seem upset that you didn’t have that final answer?
FM:
No.
SJ:
Not once?
FM:
Nope.
SJ:
It’s yeah. Uh, that’s what I expected. I mean, what I tell advisors is that clients don’t expect you to know everything. They expect you to help with anything.
FM:
A hundred percent. I think it’s, it’s really just, you can’t be afraid of saying, I don’t know, because we’re not expected to know everything. And also I think clients know that there’s a distinction between who their tax preparer is and who their advisor is, and there’s nothing wrong with that, right? So, and that’s kind of where working as a team for the client brings tremendous value to them.
SJ:
Frank let’s, um, if we can circle back for just a second, we talked a little bit about how this has been a relatively new transition for you as being in the RIA space and being able to do more on tax planning. Uh, if you wouldn’t mind, could you, could you maybe talk about where there were hiccups early on for you, as you dove into tax planning? Maybe some things that you had to learn from, even if they maybe were a little bit painful,
FM:
You mean from transitioning into an RIA and then trying to fit…?
SJ:
Specifically transitioning to be able to, talk about taxes with your clients.
FM:
I mean, it was extremely painful at the beginning, cause it’s a brand new world and it’s almost like, where do you start? Right. I mean, I, I have no interest or no knowledge of really doing 1040s and filing forms or anything like that. But seeing where the, the value is that I can provide a client in terms of tax planning. I think at the wire house, the biggest extent of tax planning I knew was just, you know, munies can provide tax free income…
SJ:
Hahahahaha (hearty laugh)
FM:
…and that you have to take the conversation a step further. And if you’re going to do a good job for your client, and really you just have to, you have to be a lifetime learner and look for the resources. You know, one of the things that I recently signed up for was a Kitsis tax course that was really beneficial. And also the perfect RIA podcast was very beneficial in terms of helping you understand which tax strategies might be helpful to your clients. And truth be told, not every strategy is going to fit every client, but at least if you have a good four or five of them in your back pocket, that’s more than the next person’s doing, right?
SJ:
For sure. And I love how a really early on in your response, what you keyed on was value to the client. It might take away from that. It was that’s where you found the motivation to want to do this, even though you have no interest in, in preparing taxes, understanding that there’s value to your client was the drive to keep pushing forward on it.
FM:
It’s also a differentiator because per capita, per head count, I believe that a good number of advisers are still at the wire-house environment and they’re probably not doing that type of work. So how do you set yourself apart is, by doing things that are different and valuable at the same time for, for your client?
SJ:
Yeah. Different and valuable. I love that. Uh, so Frank, we really like keeping these podcasts action oriented. So the advisors who are listening know what they can do as a result of all these great things we’ve talked about. So if we talk about action items, you already, you already kind of hit on it and it actually gives some great examples of that seeking education, making sure you’re being a lifelong learner. And there’s so many great resources out there. That Kitces course, you mentioned, I love it’s a course, it’s about six hours and it’s all it goes through the 1040 and a lot of the related schedules and forms. And from an advisor’s perspective, talks about what you should be looking for and what you can learn from it. So that, yeah, that’s a great resource. The other one, that gets a, a similar idea, but I’m going to phrase slightly different as far as an action item, is finding a community. Cause you mentioned the perfect RIA, I know that you’re a member of their backstage pass, finding other advisors you can learn from so that you’re seeing what works in practice. That you’re not just talking theory, but that you can, you can learn from other people. You have a mastermind or a group that you can ask questions of, if you run into roadblocks. That’s such a great and important tool in, uh, being a successful advisor.
FM:
A hundred percent. Any resource really, I mean really invaluable. And it’s like the value you provide a client, right? It’s not just one year, but over, over the course of your career, how much value does that provide to, to yourself as a professional? So yeah.
SJ:
Frank, any other action items you’d recommend to, uh, any of our listeners, as far as it relates to making sure you’re adding value through taxes to your clients.
FM:
Really I’d say just, don’t be afraid to engage your, your, your client’s tax professional and bring them in as part of the team, you want to work with them and you never want to overstep the boundaries, but you want to make sure that, uh, together you providing the best value to the respective client. Right?
SJ:
Yeah. So take a proactive approach to working with your, with your client’s other professionals.
FM:
Yeah. And then don’t be… you’ve got to have that, what they call the abundance mentality, you can’t be afraid of, of somebody else being in front of your client, providing value. I mean, that’s, that’s their job as a tax professional and you want to work with that person because again, at the end of the day, you want to see your client succeed.
SJ:
Yeah. Yeah, definitely. Well, Frank, I really appreciate you taking the time to do this with us today. I always love hearing directly from advisors so that the advisors in our community can keep learning how to step up their game and provide value to their clients through tax planning. Uh, if anyone listening has questions or feedback for us on the show, feel free to send an email to advisors@rts.tax. We’d love to hear from you. It’s also a great way to get signed up for our newsletter so that you can keep getting really action oriented tax planning, strategies that are coming from advisors who are using these in practice. All right. That’s all we have for today. Thank you everyone for listening. Good luck out there, and remember to tip your servers, not the IRS!
FM:
Thanks so much, Steven.
SJ:
Thanks a lot, Frank.
