Transcript

Steven Jarvis:

Alright, hello everyone, and welcome to the next episode of the Retirement Tax Services Podcast: Professionals Edition. I’m your host, Steven Jarvis, CPA. And in this show, I teach financial advisors how to deliver massive value through retirement tax planning. Really excited to have on the show with me today, Benjamin Brandt, the host of the Retirement Starts Today podcast and an advisor who’s just crushing it, especially when it comes to tax planning. So Benjamin welcome.

Benjamin Brandt:

Hey, thanks for having me, uh, super excited. Uh, I’ve been a fan of yours since day one!

SJ:

Hahahaha! I really appreciate that Ben. It’s great to have you here today. Uh, we want to talk about a couple of different things on the show, but I’m especially excited because – and we’ll come back to this towards the end – but we actually have some plans coming up here in the future. Some other things we’re going to be doing together, we want to get right to the tax stuff ‘cause that’s why people listen in, but we’ll come back and talk about some of those things that are coming up.

BB:

That’s a hell of a tease!

SJ:

Perfect, thank you. I actually listened to one of your recent episodes. First, I got to say, congratulations on hitting a million downloads of your podcast. I know it’s a vanity number, but it’s still pretty cool. But one of the things I took out of that episode is you mentioned that you recently completed your annual review of your client’s tax returns, and I would love to hear kind of how that process worked, and then your big takeaways.

Ben’s Process of Reviewing Client Tax Returns [1:46]

BB:

Yeah, so, so we feel our niche clients, and this is who we talk to on the podcast, it’s retirees, right? So it’s people that have generally a million to a few million dollars and their retirement income goal is about a $100,000, $200,000 kind of in that range. So that’s who we feel you can provide massive value to, and we’re trying to create a repeatable process around that. So we think one of our big differentiators is ‘retirement income guardrails’. That’s creating a flexible spending plan out of your portfolio and then it’s taxes in retirement. And so when we enter into retirement, I’m not, I’m not telling you anything you don’t already know, and to the audience, but you know, your, your retirement income depends, you know, dictates you what you’re going to pay for Medicare and things like that. So there’s just a lot of complexity around that topic

BB:

So when I was looking for differentiators, taxes are one of the things that immediately jumped out. One, because a lot of people are still working with broker dealers and they’re not going to allow, generally allow their advisors to give tax advice because they have to do lowest common denominator compliance, and if there’s 16,000 advisors at Ed Jones, Ed Jones has to deal with the biggest dummy of that 16,000. They’re not going to let him give tax advice in that, they’re not going to let anybody give tax advice. So I thought, Hey, what a great differentiator as an independent RIA, I’m responsible for my own advice. I can give tax advice as a CFP. You know, I suppose legally I can give tax advice and that’s a good enough enough for me. So that’s one of my big differentiators is tax advice.

BB:

So how we do that is we have our office manager, Diane, uh, about four weeks out from our first what we call surge appointments, and that should be language that’s familiar to your audience. We move every single client over the course of like five weeks. So four weeks out, Diane sends them the calendar link to schedule their appointment, and also a reminder, ‘Hey, we need to look at your, at your tax return for 2020’, here’s the share file link. You can upload it in an encrypted way and then they take that tax return. And my staff does, uh, they get in my email inbox and take that tax return and they upload it to Holistic Plan, which is a tax software that, that financial advisors use. Then I take that tax software and I physically review their return. I’m looking for just a couple of different items.

BB:

And then I look at holistic plans tax report, and we do what’s called guided discovery. So we go through with clients and we look at, you know, here’s your marginal rate. Here’s how that’s calculated. Here’s your effective tax rate. Here’s what that means. We divide your total tax into your total income. We did a $30,000 Roth conversion that last year we locked in a 9.7% average tax rate. Here’s why that’s important. Here’s the top of the 22% bracket, that’s our target for your income, here’s why. Here is your, your Irma, your income based Medicare part B premium. Here’s the date that they’re going to start looking at that if you’re not that old yet, here’s the brackets that we’re operating within if you’re older than 63, and we just have guided discovery. We do that twice a year, every year, which for the financial advisors listening, that sounds totally redundant.

BB:

And it sounds like a waste of the client’s time. It’s not, because just because we have level 301 knowledge, level 401 knowledge of taxes, the clients don’t, they don’t even have 101 knowledge yet. So they’re going to have to hear this information four times, five times, six times before it really makes sense to them, and understanding why they want to earn an extra $30,000 of income this year when they’re 61, because they’ll pay a lot less taxes later on when they’re 73. So just reviewing these things, having a guided discovery twice a year in the spring and in the fall, probably May-ish November-ish, extremely important. So I don’t know if that answers your question. It was a lot of words. Uh, but maybe that answered your question.

SJ:

Yeah, it definitely did. There’s so much great stuff in there. And I can tell from the way you’re describing it, this isn’t something you’ve just done once or that you made up as you went, like at this point, you’ve clearly practiced this a lot. You’ve got it very narrowly focused on your niche, which is awesome. With tax planning, especially for advisors, the goal shouldn’t be to become an expert in every tax topic. Then you’re working with retirees, so spending a lot of time, figuring out depreciation, recapture, or accelerating depreciation, just isn’t going to be relevant. So why spend the time? But as you went through that description and how easily you rattled off some of those things that are applicable to your clients, you clearly have practiced this and now I’m sure it feels seamless to your clients, and they’re going to ton of value out of it.

SJ:

I do have to call out because I know I have listeners who are at broker dealers, including Ed Jones, that you definitely make a fair point. The independent advisors have an easier time of applying tax planning, but for the creative advisors out there and the ones who are committed to the value that tax planner provides, you have to be assertive enough to work with your compliance department, to make sure that you’re staying inside those lines on compliance, but that you’re not giving up providing value to your clients. Don’t let compliance be an excuse. Then kind of related to that, you and I were talking before the show about just taxes in general, being an excuse that advisors use, or at least the complexity of tax. ‘Well, I’m not a tax expert, so I’m just going to leave it alone.’ I think you’ve even mentioned that maybe at one point, that’s the way you felt, maybe, maybe talk about how you got to the point where you were like, ‘you know what? I’m going to talk about tax with my clients.’

How To Shed Head-Trash, Develop And Master Your Niche [6:53]

BB:

Yeah. So I looked at that as a differentiator, but I also, I had the head trash in that, I only have one style of client by design. So there’s a lot of things I don’t understand, like I’ll get into conversation with, with financial advisors that are really dialed in with taxes for business owners. And they’ll say, here’s how I saved a client X hundred thousands of dollars to taxes. I don’t know how to do that. That’s not who my clients are. So it’s easy for the head trash to creep in and say, well, unless you can give tax advice at a Steven Jarvis level, you just shouldn’t give tax advice at all. And I would, that was the head trash that I had and probably some of the head trash your listeners have, but I’ve really pushed back on that. Now that I’m on the other side of that and saying, there is definitely a minimum viable product of tax advice that every advisor could could give.

So what you should do is that – again, this really helps if you have a niche, but if you don’t, that’s okay – you can look and see what is the common thread that exists among all of my clients. Is there one factor that everybody has to deal with? Maybe that’s Medicare, maybe that’s Irma. Maybe that’s a requirement of distributions. Maybe that’s qualified charitable distributions. Maybe that’s just something as simple as making sure that each of them took advantage of the $300 or the $600 above the line charitable contribution that they could take along with their standard deduction this year, or just understanding the difference between itemized and standard, right? Funding and donor advice, when it makes sense, when it doesn’t. There should be some thread that applies to just what every single client that you, have become a master in that, and then roll that out in your client reviews.

You only have to master it once and understand how it applies to everybody. Again, having a niche is almost a cheat code. If you have every single different type of client that you can imagine, this is harder to do. Find that common thread between everybody master it, right, master it. And then next year, broaden it, next year broaden it, next year broaden it. So version 1.0, 2.0, 3.0, 4.0, before you know it you’re covering six or seven different areas of the tax code for your niche client. And that’s your hour, you know, semi-annual review you. You’ve just loaded them with value over these five or six areas you’ve collected their tax return. Some of this you can even do for them ahead of time, uh, figure out one thing that’s a through thread and then build on that. So don’t let your lack of knowledge… Don’t say, ‘I’m going to do that when I get that next certification. When I go to that next course, when I joined this program.’ No, figure out what you can roll out today and build on.

SJ:

Yeah. Uh, geez. I love that describing that process of how that can build, uh, cause the great news is, your clients know you’re not a CPA. That’s not going to come as a surprise to them. So, especially as you’re starting out, you are not going to put anybody off by saying, ‘Hey, here’s a topic I think we should discuss, but we’re going to talk to your tax preparer about it.’ And even as you build through that process that Ben’s talking about, you should still be involving your client’s tax professional in these discussions to make sure it is done correctly. It helps reduce your liability. It helps make sure the client is getting the right answer, but your client is going to feel so taken care of because you’re the one that’s helping uncover these opportunities, because your relationship with your client is always going to be different than with their tax preparer, just because the model is different. For a lot of people, they meet with their tax preparer once a year, it’s in a very stressful time of the year. There’s not this same level of dialogue and understanding about their personal life, to know about these different things that you might be able to bring up and discuss.

Why You Should Roll Out New Strategies Client-Wide, Today! [10:10]

BB:

I think advisors might be hesitant to do something and roll it out client-wide, because they’ve got 50, 100, 150 households that are going to take them up on this offer, at least that’s what we think. This is our third year that we’re very specifically asking for returns and following up. And I would say our first year I would be surprised if we had a 50% penetration. So we asked everybody for returns and followed up but since this is a totally new thing to them, you know, only about half of our clients actually got us that returns. Better the second year, better, the third year, better in the fourth year. I think we had absolutely everybody for this last surge time, but that’s because Diane had to go, our office manager had to go and, you know, kick down people’s doors and, and do those sorts of things.

Don’t be afraid of the scale to roll it out, because my point is, not everybody’s going to take you up on it the first year. So you’ve got 50 clients, maybe 20 or 25 take you up on that. Great. You could, you can knock that out probably in a day or two, getting that prep done. So you’ve got a chance, like a minimum viable product again, you’ve got this chance to ramp it up over time. So again, don’t let that be an excuse that you’re not going to roll it out until you’re ready. Your clients were probably going to need some time to adapt to this new service offering that you’re going to be offering to them.

SJ:

Definitely, and even if you’ve really narrowly defined your niche, uh, not everyone within your niche, not every within your client base is going to have these opportunities every year, these unique tax areas. Some of them, it’s going to be as simple as letting them know, ‘Hey, we went through your tax return. These are the things we normally look for. Good news! We didn’t find any errors; we didn’t find any concerning issues. So we’ll make sure we review it again at our next meeting, and it looks like you’re in a good place.’ And you’re still delivering value because they get the peace of mind of knowing that someone is taking care of them.

BB:

Right! Even if there’s nothing specific to do, if you told somebody that I looked for this and didn’t find it in your case, like the deductibility of your HSA, for example, Hey, I noticed that this was done correctly or that this doesn’t apply to you. You know, people, people get a good peace of mind that, okay. That’s one less thing for me to worry about.

SJ:

Yeah. Yeah, and you mentioned a couple of times in there of having Diane, your office manager help with the process. So, even though taxes can feel like this scary, complicated thing, a lot of the legwork around getting the tax returns, around kind of organizing some of the data and doing some of that initial review can be delegated to an office manager, to a relationship manager, to a junior advisor. This doesn’t have to just be… don’t look at getting tax returns as, ‘Oh geez! There goes my next three weeks of the advisor’s time. That’s all about how you built your systems.

BB:

Right, so Diane sends out the request. It goes into ShareFile, which goes into my inbox. She grabs it out of ShareFile, uploads it to Holistic Plan and then checks it for errors. All I have to do is click on tax report and look at that, which I’m going to look at that live with the client. I’ve seen enough of them that nothing really stands out as different, then I can actually review their return, probably takes five minutes to do both of those as prep. So if I’m seeing five clients that day, I got the first half hour of the day blocked off five times five, 25, and I’ve got five minutes. I can eat donuts and watch CNBC and drink coffee in the lobby.

SJ:

Perfect. Got to get to that donut time. So Ben, I know that tax planning is one of those key differentiators that you’ve identified, and you’ve talked a lot about how you add value to your clients through tax planning. What’s this look like in the prospecting process? How do you, how do you show people? How do you quantify or demonstrate to them that this is worth talking to you as opposed to someone else? Who’s not going to talk about taxes.

Ben’s Process With Prospects: How He Promises Massive Value To Clients [13:30]

BB:

Yeah. That’s a great question, Steven. So, I think clients are under the misconception of what, of what they really have the day they retire because they’ve been accumulating right? Saving in the twenties, thirties, forties, fifties, sixties, they see this number that goes up every quarter. So in their mind, I’ve got a $500,000 retirement. I’ve got a million dollar, I’ve got a $2 million retirement, right? They celebrate! I talked to a guy last week, they celebrate the day their fidelity statement goes over a million dollars. Their Vanguard statement goes over a million dollars. I’ve got a $1 million retirement, which is a significant misconception. So I illustrate for them in our prospecting process. When I deliver the plan to them, I show them here’s your 30 years of cash flows or 40 years of cash flows and here’s what we think your surplus is going to be.

So you don’t have a $2 million retirement. You’ve got 20 years, 30 years of a hundred thousand dollars cash flows. And because you’ve over saved the mark, you’ve got a $4 million surplus. So you don’t have a $1 million or a $2 million retirement. You’ve got all those years of growth and cash flows that we really need to account for because that’s what we’re going to be paying income taxes on. So, beforehand I’ve gone through a tax report with them and they understand because I’ve explained it to them what their marginal and effective tax rates are. So I say, Mr./Mrs. Client, if we add up all these cash flows and we add this surplus at the end, you’ve really got a $7 million retirement. You don’t have $2 retirement, which is the value of your 401(k). You’ve got what that’s going to become over the course of your retirement.

That’s $7 million if we add it all up. So we already talked about your effective tax rate. If your effective tax rate over the course of your retirement is 10% on $7 million. What does that mean? Well, they’ll explain to me 10%, $7 million. What if it’s a 25% effective tax rate? You think taxes are going to go up or down? 25% effective. So you’ve got a $3 million, you know I’m – guided discovery – I’m doing these numbers with them, right? How can we account for a $3 million federal income tax bill over the course of your retirement? ‘I don’t know Benjamin. How do we do that?’ Well, what if we do small things like rounding out your tax brackets with Roth conversions? What if we fund donor advised funds every third year that we can get those itemized deductions? What if we do qualified charitable distributions?

What if we, blah, blah, blah… All the things that are in my one-page financial plan. What if we just sand the rough edges off of a $3 million lifetime tax bill? What would that mean? That would mean that I would cover my fee in perpetuity plus all of the things that I’m doing. Portfolio management, cash flow management, helping you pick out your health insurance, all those things I’m doing on an ongoing basis are free because I’ve already offset my feet by helping you reduce this $3 million lifetime tax bill. That’s what comes up in the prospect process. We’ve already discussed my fee, hopefully, but I’m putting value right on top of that saying, I’ve already accounted for that. So it’s much less of a concern.

SJ:

That’s such an awesome way to phrase that to the client. I don’t think I’ve heard that before. Just getting right down and quantifying, just by, I think you said sanding off the rough edges, which I like as well. Just by sanding off the rough edges of that tax bill that you’re covering your fee in perpetuity, as far as the value they’re getting and then everything else is free. Everything else is just you exponentially providing value to them.

Simplicity Vs. Complexity [16:30]

BB:

Right? Yeah. That’s our kind of angle because my clients are retired and it’s mostly in an IRA. There’s not one big, sexy thing that I can do. I wish I could, right? Where we’re going to do this, this, this, and we’re going to save you $50,000. You know, maybe if they get a big inheritance or they have some kind of a land sale or something. Those things come up here and there, where we can save them some big money. But most of the time it’s going to be sanding off those rough edges. Cause it’s going to be: I need to take 70,000 out of my IRA to fund my lifestyle expenses. What if we take out 95, then we’re not going to have RND troubles down the road, and record a spike in your income and just having the guided discovery twice a year. That’s where our value is because that’s going to significantly reduce their tax bill over time. And we know that just because of trial and error and different things, but that’s how we can cover our fee indefinitely. It’s just doing some of those little things. Again, that’s one-o-one stuff. For advisors they think, you know, we think that that’s too simplistic, but the client doesn’t know these things. They would have done it on their own accord. So that’s where we can provide massive value. It seems like low hanging fruit to us, but that’s because we do it every single day.

SJ:

Yeah. Value does not equal complexity or, or vice versa. However, you want to phrase that. It doesn’t have to be this idea that no one’s ever heard of before, you can Google anything. I would bet that most advisors out there, whether they think so or not, do not have some proprietary approach that no one else has heard of. Usually if you’re getting into signing NDAs, before you hear about a tax strategy, it’s probably questionable how much anyone should be doing that. So to your point, I mean, a lot of this is low hanging fruit for people who do it every day, but your clients are coming to you because they don’t want to Google something and try to figure it out for themselves. They want someone to help them implement, and giving them accountability and consistently helping them implement is where you’re going to deliver value.

And whether your niche is retirees like Benjamin, or you have a different niche that’s far removed from retirees. That concept of the value coming from sanding off the rough edges, I think that’s pretty consistent. If you take a long-term approach to tax planning, you can find those ways to not keep leaving a tip for the IRS is how I usually look at it. We want everyone to be tax compliant. That’s not, or we’re never advocating for tax approaches that you know, flirt or disregard the rules. But there’s no patriotic awards for paying extra and so that idea of kind of sanding off the rough edges, looking for those things that over time can help reduce that lifetime tax bill that we all pay, is where you can deliver massive value to your clients.

Wisdom Vs. Knowledge [19:00]

BB:

And I want to build on something interesting. You said there about Googling, right? So, so the tax code is all out there, right? There’s, there’s a 100 podcasts about, and there’s a 100,000 blog posts and there’s 50,000 YouTube videos about tax planning. Right? Google knows all of it, right? So don’t compete with Google, right? Google knows everything that we know, that’s knowledge, right? You Google knowledge. I have a specific question. I want a specific answer. That’s knowledge, what they’re looking for from their CPAs and their advisors is wisdom. Mr. Mrs. Client, here’s how I help the client in your similar situation last week. Here’s how I helped 10 people over the last, over the course of last time appointments, save on this area, right? That’s wisdom. That’s the done for you, right? Google can’t compete with that because that’s a one-off but Google will always beat you on knowledge and it’ll do it instantaneously and for free. So don’t offer knowledge because we’re already beat in the area. Your clients want wisdom from you. They want, ‘here’s how I helped this client in a similar situation, shorten their learning curve, provide massive value, wisdom, operate in the wisdom world, not the knowledge world.

SJ:

Yeah. I love that. Yeah. I can. I can go Google IRS form 8606 and the form is going to come up, the instructions are going to come up. But if I Google should Steven Jarvis file form 8606 this year? Google’s not going to help me as an individual, and that’s what your clients are doing. They’re coming so that you help them as individuals. So you provide that wisdom so that you can, I, I really liked that of, ‘Hey, I just helped this client in a similar situation or these 10 clients.’ That, that’s yeah. So much, not just credibility, but value comes from taking that approach.

Hey, podcast listeners, are you interested in content that provides you with action steps that you can take to deliver massive tax value to your clients? Then you are going to love our powerful training sessions online. At Retirement Tax Services, we meet with the top producing, highly innovative financial advisors from across the country. We discuss their most pressing tax concerns and strategies on how they can take tax theory and transform it into tax planning for their clients. Register today at retirementtaxservices.com/welcome, or click the link in the show notes. Aren’t you ready to start being a part of the conversation? Yeah, I thought so. We’ll see you online.

An Exciting Update from Retirement Tax Services [21:17]

SJ:

Ben, before we transition to, uh, action items, because you talked about wisdom and not just knowledge alone. Let’s come back to what I kind of teased at the beginning of the episode of some of the fun things that we’ve got coming up. So, why don’t you go first?

BB:

We’re still working out some of the details, but you’re going to potentially see a lot more of me on this platform. So if you like what I have to say, if you like learning about podcasting and learning about providing massive value from a tax perspective to retirees, you might see a little bit more of me, around.

SJ:

Yeah, definitely. And your first opportunity to see more of Ben is actually going to be on July 1st. We’re really excited today! Our cart opened for more members to join the retirement tax services network. And on July 1st, we’re going to do a members only webinar. That’s going to be a Q&A that’s building off of a webinar we did this morning, talking about some tax topics that are going to be impactful to your clients right now this year. And just due to time constraints, we really weren’t able to go as deep on that as we want it to. So, Ben has agreed to join in with me to have some fun and answer those specific questions from our members so that you’re getting both the more technical answer from my perspective as a CPA. But you’re also hearing from Ben, an advisor, who’s doing this in practice. So we’re making sure that you’re learning from those who are doing and not just those who sit back and spew knowledge. So Ben let’s talk about specific action items that advisors can take from the things that we were discussing today.

Ben And Steven’s Action Items [22:41]

BB:

Okay. So, action item would be, you want to roll out tax advice for your clients, but you don’t want to give yourself another job, right? You want to operate with good solid information in front of your client, but you don’t necessarily want to add an extra hour or two for prep time per household. So what you need to do is create a system and processes where you can ask for all of your client’s tax returns, but you’re delegating all of that, all the way up to the point where you get the tax report in hand. So what we do is, we get about four weeks ahead of ourselves. Our office manager sends out that calendar link and then to schedule the appointment and all that time is blocked off on my calendar, and then within that is the ShareFile link, to upload your tax returns. And then we have just a spreadsheet that we’d don’t have tax returns from these 80 people, and the next week it’ll be 70 and next week it’ll be 50, next week it’ll be 20. And we’ve got five weeks of surge that we’ve got time. So, it’s a nine-week total process. So rather than giving yourself another excuse, not to do this because you don’t have the scale. Develop the system and the process first. Delegate it before the work is even there. And then you’ll be able to execute with Supreme confidence.

SJ:

That’s awesome that getting tax returns is an action item I include on pretty much every episode. So I really appreciate you giving a framework of how to do that and I like how you said that of not giving yourself another job. Nobody needs another job.

BB:

Absolutely.

SJ:

The next action item I would put out there, is that like you heard Ben so smoothly go through, ‘here are the things I talked to all my clients about related to taxes’, make sure you’re taking the time to narrow down that list of three or four or five items that are those common themes for your clients, so that you don’t feel overwhelmed with trying to understand the entire tax code, that you can just focus in on those few things, whether they’re the same ones that Ben talked about. ‘Cause you also work with retirees or maybe it’s soft based incentives and the tax implications around that. Or maybe it’s really the small business owners, but whatever those common themes are for your clients spend the time to get really comfortable with those. And keep in mind that you can still end that conversation with, ‘and we’re going to work with your tax preparer to make sure we got this right.’

BB:

I love it. That sounds fantastic. Yeah. Everybody should make it a point to give some level of tax advice to their, to their clients because, fee compression is real for the people that aren’t delivering massive value. So you want to get out in front of that learning curve, start giving more value at scale now, and then you’ll be the last guy on your block to have to lower their fees.

SJ:

Yeah. Or, this is part of the reason that you are raising your fees, going to your clients and letting them know that, Hey, here’s something additional we’re doing this year to deliver value and quantifying what that means for them. If you’re not in the independent space and you have a little bit tighter compliance requirements, sometimes even just using tax planning, instead of tax advice can go a long ways. People get a little hung up sometimes on calling it tax advice. Don’t, don’t get hung up on definitions, what you’re trying to do is help your clients, provide peace of mind to your clients and confidence that they’re getting value through the process. So if you need to call it tax planning, if you need to call it long-term cash flow, I don’t know what your compliance department’s going to ask, but, don’t just ignore the whole thing because you haven’t even had the conversation you haven’t even tried. So, get past that piece of head trash.

BB:

Yeah. Figuring out the minimum viable product you could deliver this next tax year and see how you can go about working with your compliance department to deliver that and then build on it over time.

SJ:

Yep. So I, that really would be the last action item is whether you’ve already been doing tax planning for years or you’re brand new to it. You can still build on this process that Ben’s talking about and add one new thing this next year that you’re going to talk to your clients about related to tax planning, whether that’s the first thing you’ve ever offered or you’re adding number four or five, add something new to this next round of client meetings.

All right. We really appreciate everyone listening in. Feel free to go out there and leave us a five-star review and give us some feedback. We always love to hear from our audience. Like I said, thanks for listening. Good luck out there, and remember to tip your server, not the IRS!