Read The Transcript Here:

Steven Jarvis, CPA (00:51)
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 as always, I’m super excited to be doing another episode. This one’s a little bit more on my nerdy side, but it answers a question that I get so often from financial advisors around: what tools are out there? What software should I be using? And when I get to like go deep on these things, I get really excited. So joining me this week is Justin Boatman, Chief Product Officer at Nitrogen, who’s here to talk about one of a new tool that they’ve released around taxes. And so I’m not going to try to guess at any of this. Justin, welcome to the show. I’m so excited to be having this conversation with you.

Justin Boatman (01:32)
Thank you, Steven. Glad to be here. By the way, I just have to say I love your intro music. So I don’t think I’ve ever heard anyone fully rock out to a disclosure before. So that’s impressive.

Steven Jarvis, CPA (01:42)
Well, thank you. That is on like my nerdy bucket list. The fact that I can get on stage to my own parody tax song from a classic rock song. mean, like, like I’m living the CPA dream. Like, let’s be honest.

Justin Boatman (01:57)
It’s perfect. It’s perfect. I love your podcast. say I saw you had Mike Bennett on. Yeah. Uh, just a few weeks ago, just handful of weeks ago. Listen to that one. I love Mike. Um, uh, Mike and I once discovered accidentally that we live in the same suburb of Sacramento. He and I are sitting in a business meeting. He and I are both in, but we’re looking at each other going like, why does this guy look crazy familiar? And we couldn’t figure it. And then to the point where each pinged each other and we’re like, how do we know each other from something else completely unrelated and couldn’t figure it out for the longest time? And I forget which one of us said, I know what it is. We got paired up on the golf course at one point and spent the entire day with them and did not know that we were kind of circling in the same industry. That’s just kind of how it goes on the golf course sometimes. But anyway, I love that guy. is going to, he is. Yeah. So I highly recommend that episode, by the way. Love the team at Encore.

Steven Jarvis, CPA (02:46)
Thank you. Thank you. I appreciate that. Yeah. And it is funny how small this industry is and how much overlap there is. And we can get just a tiny bit of background. I’m sure a lot of my listeners are familiar with Nitrogen as a company, obviously, originally Riskalyze. And you guys really kind of came to notoriety, helping advisors with risk assessments for clients, but it’s grown to so much more than that. And then while you and I are specifically getting connected, was recently, or I’m about to do a webinar for Nitrogen, and I’m excited to speak at the Nitrogen Fearless Investing Summit in February, coming up here real soon. But as some of these conversations were going on, somebody on your team said, Hey, we’re actually launching a tax tool. Would you be interested in learning more about that? And I was like, of course. Like, put me in touch with whoever runs this thing. I wanna know exactly how this works. So Justin, share any other background you’d like about what you do specifically with Nitrogen or how we’ve gotten here, but let’s talk about this tax tool.

Justin Boatman (03:45)
Totally, and to your point, you’re right. does kind of feels like a small universe sometimes. I am speaking of Encore. We will see Bennett at the Fearless Investing Summit. And you’re speaking at it. And I was thrilled to hear that you’re speaking at Fearless Investing Summit. I’m obviously biased, but I think it’s just the most fun and helpful conference for financial advisors there are out there. So that’s coming up in a month and a half or so from when this is airing. So it’ll be good to see you there.For those who know Nitrogen or formerly Riskalyze, we started as a company that did risk alignment-based proposals for advisors. We believe everybody has a risk number, whether they know it or not. Risk number one, literally and mathematically is cash under the mattress. The best case, it’s not going anywhere. Worst case, it’s not going anywhere.
And then risk 99 is like a highly concentrated stock position. But we believe we can measure somebody’s tolerance for risk and they can have investments properly aligned with their risk number. Right. I happen to be a risk number 89, a little more on the aggressive side. We’ve quantified that. And I know that my investment portfolio, I think, is right around in the 70s somewhere right now. And so that is, you know, our first product we call a risk center was what we brought to market. A lot of people know for that. There’s been quite the evolution even since then, as our company now called Nitrogen offers a suite of AI products for advisors. The fact that it took such a robust individual security level analysis to do risk assessment on somebody’s investment portfolio meant that we had been building a bunch of data that we could uniquely act on.

Justin Boatman (05:22)
And so it allowed us to go, okay, well, if the advisor is now trusting us not just for that risk alignment, aha, but more of these great client moments and client experiences. And we’ve got all the investment tools. We could dip into investment research and we’ve got some interesting AI tools for investment research as well now. And dip into some specialized planning things because as we’ve built over the years, we’ve kind of realized we feel like our place is…kind of being the front end, something where an advisor can swivel their monitor in a meeting with their client. And it’s all about the meeting at the end of the day, right? Like all the great moments that matter happen in the meeting. So we just want to help advisors crush it in the meeting with these kind of client facing experiences that help illustrate to the client what you’ve been telling them for years. Like let’s just help put an illustration layer on that. And so. The AI products we’ve been building have all kind of been with that mantra. Does this help the advisor crush it in their meeting? Does this help unlock an aha moment? Kind of an elevated client moment. How many elevated client moments can we rack up by developing? And right now is a really exciting time to be developing product. know, we’re able to do it, you know, more efficiently and quickly than we have before, act and iterate on user feedback faster than we ever have been before. So we’ve been on a tear of new products. So sitting in the product seat, that’s been kind of fun to be a part of here. And yes, our latest product that we launched this fall is AI Tax Center. And it helps you have these aha moments and great client moments around tax for the advisor. And it’s something that folks have been asking for. So that’s kind of how we got here.

Steven Jarvis, CPA (07:00)
Yeah, so and Justin, for people who listen to my podcast, I mean, I don’t need to convince anyone here of the value of tax planning. I get asked all the time for kind of my opinion on different tax tools that are out there. So this literally has just been released. I mean, as nitrogen as a company, we want to have these aha moments. We want to help in client meetings. What does that mean for a tax tool? Like what is it an advisor can use this AI tax center to do? Like how do you measure success of this tool?

Justin Boatman (07:26)
It’s kind of drop dead simple to explain, at least you take a client’s 1040, upload it into our tool. And then within a minute or so, we give you the things that you need to host client conversations and mainly in the form of a tax snapshot. So let’s help visualize what’s going on in this, as you know better than anybody, complicated tax document that a client’s not always going to understand. So it’ll help visualize that and let them understand of their income versus passive or their, even just tax brackets, which isn’t something that a client is going to see illustrated in their tax return, right? How much headroom do they have? Things like where they’re at in their MAGIi tiers, different opportunities. So you get this tax snapshot of, okay, I can see and understand what was going on in this pile of paper, in something that’s really, you know, client friendly visually and makes the advisor look good and professional. And the advisor also gets an advisor-facing set of insights that we’ve curated. We use AI, apply some guardrails onto it and say, hey, here are some tax insights that an advisor could turn these lowercase R recommendations into capital R recommendations or most commonly, Hey, let’s like facilitate a conversation with your CPA or something like.

Steven Jarvis, CPA (08:43)
Justin, talk a little bit more about the idea of having guardrails on this. Because if I can guess a little bit at where you’re headed with this ,I really like the mentality behind it of AI can be this really open-ended, do. That’s always been the problem with Excel, right? With all due respect to every software out there, this is the CPA nerd in me. Excel has billions and billions of dollars invested into it and it can do just about everything. The problem is it can do just about everything. And so trying to figure out what specific thing to do becomes the problem. So is that really the idea behind the guardrails is to say, how do we narrow this down and help advisors actually take action? Is it more of a like, hey, we’re trying to protect ourselves from getting you into dangerous waters.

Justin Boatman (09:21)
Yeah, I mean, I think it’s a little bit of both. you know, like, there’s a reason we brought in a team of experts to help us with these with these insights and CPAs and things to go let’s let’s try to guide an advisor who look like, you know, we don’t expect the advisor to be a tax expert. Most of them aren’t at least to a CPA level. You know, we ask our advisors like 60 something percent of them say, I just have a referral relationship with the CPA. Right. I know I guess your only other options are, know, minority would say we’ve got one on the team. Five percent of our users say, hey, I am one. But, you know, less than one in five say, Hey, I don’t lean on a CPA. And yet you’ve got this dynamic where advisors are expected to be more tax aware. I think that’s, you know, I think that’s in large part due to, you know, guys like you who are helping elevate advisors in that way, right, which then creates this competitive dynamic where, okay, now all of a sudden, if I as an advisor, my competition is saying that they’re more tax aware or that they’re doing a tax return analysis every year for their clients, like we need to step it up and the tide kind of rises for everybody. So, how do we, without saying, all right, advisor, we need to turn you into a CPA. How do we then say, yeah, but because you’re expected to be tax aware, have this data on hand and be able to speak to it and tee up the right kind of conversations with those CPAs? Like how can we unlock those aha client moments that add value to the advisor without just setting the advisor loose into the sea of who knows what. And we know in our space, know, compliance is a big deal, which is one of the reasons we go like, look, we want to use the power of AI and yet not be completely surprised, you know, by what might be recommended. And so there are certain kind of lanes or categories and things that we would want AI to sort of focus on with the advisor. And then it’s up to the advisor on whether or not to tee up a conversation with the client. But I think AI with guardrails is both powerful and just works best in our industry.

Steven Jarvis, CPA (11:24)
Yeah, that makes a ton of sense. So Justin, let’s talk a little bit more about kind of that idea of how AI can help, like keep us in line with compliance. Well, and maybe this is actually changing gears just a little bit. Over the last couple of years, more and more tools are popping up in every area, like my tax is my focus. So like from your standpoint and from Nitrogen as a whole, like what pushes you to go and create this additional tool for your existing users as opposed to looking around and saying like, there’s already these other tax tools they can use. Is this more about you think your tool is solving something that other tools don’t, or is it about giving people one world they can live in so that when they come to Nitrogen, they can do all the things?

Justin Boatman (12:02)
Yeah. Well, there’s certainly a benefit of integration, right? Where you’ve got one software vendor, and you’ve got one place to sign in and everything kind of talks to each other, and having that be seamless is a benefit. It’s not the main reason. We don’t just build things so that they can be integrated well. There are things that we think we can uniquely do that others can’t. One of them being, think, we take a unique approach in that we design experiences with the end client in mind, right? There are tax tools out there. We’re not like inventing the first tool that helps advisors do tax analysis, but there are a bunch of tools out there that will take a client’s tax return and turn around and give you an output that looks and feels like a tax return, you know? And so we think if we’re sort of uniquely positioned to go, okay, let’s actually have the light bulb go off for the client on these things, then we’ve got a little bit of a design edge there. There’s also just the fact that we do have, you know, like as an integrated experience, there are things where like our tax tool is positioned to help you uncover held-away assets, where that makes sense, right? So like our risk center is really good at converting held-away assets if you need to have a conversation about them, right? We want to manage your entire portfolio to your risk number. We don’t want…unknown risk in your investment portfolio, and so where it makes sense and is in the best interest of the end investor. Our other tools are really great at converting held-away assets. Tax Center helps you discover those held-away assets in the first place, right? Like we say, schedule B doesn’t lie. And so, you know, when we see things on schedule B where, you know, we’ve got interest or dividend-bearing things number question mark, right? And a risk number question mark is a really good conversation starter to go, okay, well, maybe we should at least do an analysis on these outside assets to see what’s going on and whether it can be a part of the broader investment management picture. And then likewise, you know, if there’s evidence of high cash balances, you know, we can say, hey, like your tax return can give us the breadcrumb clues and to go, hey, if there are really high cash balances here, those are a risk number one. Should they be a risk number one? Like maybe they should, I don’t know, but like, you know, in terms of being able to go, and I think tax is just an interesting sort of front of the funnel conversation to go deeper about investments too. So that’s one of the reasons we’re doing it. And there are things that, we can do because we’ve got the investment analysis side that others couldn’t and that’s where we think we uniquely have a right to play in it.

Steven Jarvis, CPA (14:35)
That’s really interesting. Yeah, because for advisors who are already centering their conversations around that risk number, it’s a natural segue, with all due respect, you already know it as well. Like it’s not a unique idea for you to say, hey, we can take schedule B and identify other assets. I mean, that’s not a unique idea for me either. And I also talk about it all the time. But where Nitrogen is taking that a step further is to say, hey, if you’re in our universe and you use the risk number as the center of your discussions,now we’ve not only identified the assets, we’ve also now given you an immediate segue into how you bring this back to this central conversation you have with a client on a regular basis. Because that is a big challenge for advisors is how do we take technical or objective data we learn from a tax return and then bring it into meaningful conversation? Because it’s not a great client experience if you say, hey, I was looking at your schedule B, it looks like you have all these assets that I don’t manage. I want to manage them, you should probably let me manage them. That’s not a value-added conversation to the client. But if you’ve laid a foundation where we have this conversation around risk or whatever the foundation of your client relationship is, then we’re seamlessly tying these things together.

Justin Boatman (15:39)
Yeah, yeah, absolutely. I mean, yeah, you sort of need a, a story and messaging framework to get from one conversation to the other. Right. And so, you know, we just, we want to exist to help advisors tell those stories. And I think we’ve kind of got some unique frameworks to be able to do it, which is why advisors have been asking us, can we do this in this ecosystem and this, like the advisor and client have this shared kind of translation layer and language.Right? Like what can we do within that ecosystem of the shared language with the client that helps us, you know, helps us create those fearless client moments.

Steven Jarvis, CPA (16:12)
Yeah. Well, I mean, that sounds like a great starting point for what that tax center does is that are there other things that right now you want to highlight or should we go to like, hey, where do you guys see this going?

Justin Boatman (16:19)
man, yeah, too tempting to talk forever about where we’re going. So I think…

Steven Jarvis, CPA (16:24)
Okay, well let’s start with the here and now and then we can nerd out for a little bit on where this could go.

Justin Boatman (16:27)
Yeah, mean, well, I mean, it’s so tempting that I’d like to maybe even dive into it right now. As of now, we’re working on some better ways to do, you know, like PDF printed client deliverables and things like that. That’s not a swivel the monitor conversation, but more of a leave behind where we’re going. Look, there’s, you know, advisors are asking us to do more in terms of look like Roth conversions are things that advisors are asking us about. That’s another one of those. think we can uniquely do some things because we’ve got the investment portfolio that others couldn’t. Even just things like return projections and things that we work on from there. We’ve got the actual real investments, and we can do future return projection stuff in a way that’s even a bit more sophisticated than old school Monte Carlo, given how we do the cross correlation and diversification return analysis under the hood with individual securities that we analyze for risk and investment research purposes. So if we can marry those things together, I can have a really powerful Roth conversation. And that’s something that we wanna work on going early into the year. And then…You know, we also have opportunities to take the tax transition conversation and have it be a little bit more educational with the client, right? Given that our tool is proposal in nature, and you know, and so all of our, you know, whether it’s risk research and some of our planning tools, you’re usually saying, hey, here’s A and here’s B. And the risk number, actually, you know, drives some urgency in wanting to get to B. Right. And that’s usually a good thing. Right. You look at that and go, OK, I understand that I don’t want to be invested like an 85. I want to be invested like a 45. And I’m all of sudden as a client really motivated to get to a 45 as soon as possible. Not always in the best interest to go from an 85 to a 45 overnight. Right. And how does the client then understand that we’re going to manage your transition and taxes? You know, we’re going to manage that really thoughtfully. And so…We think that there’s things that we can do to set up that, like we said, a story framework so that the client can see and understand, okay, I need to get from A to B, but because of taxes, it’s not going to be an overnight thing. And let’s talk about how to manage that transition.

Steven Jarvis, CPA (19:38)
So Justin, let’s dive into that a little bit more because whether someone’s using risk numbers to drive that conversation or they’re just working with clients on a balanced portfolio, whatever framework you want to use for that, I’m not the investment guy. So you tell me if I’m getting some of this wrong. But what I see so often with advisors, especially as they bring on new clients or a client has a big event and brings on new assets, this has to be a really intentional part of the conversation to be done correctly, of how do we shift assets from where they currently are to the portfolio, the balance that we’re looking for, and how do we understand the tax ramifications? Because I’ve certainly seen advisors do that wrong and create surprises for clients, create painful surprises. So are you saying that that’s a place you want to go with the tax center that you’re gonna be able to more clearly illustrate how that happens or that’s a place, that’s a thing you’re already doing?

Justin Boatman (19:23)
We would like to go further into that conversation. There are certainly different ways we can do it, but one of our mantras is like we just we’re not in the predict the future kind of game, you know, there are other risk tools who have stress tests that say, well, what if, you know, what if this happens in the future? What if oil does this? And what if a different pandemic breaks out on that side of the world? And they tend to try to predict the future. We don’t, our stress tests are all historical in nature and we say, we know what happened in 2008. So if that happened again, let’s run your portfolio through that.We stay historical in nature. And so we’re trying to go, how do we put a lens on a tax transition plan for a client that is digestible enough for the client to understand? And we’re not trying to predict the future because you know, you and I both know the moment I create a perfect chart from A to B and go, here’s exactly how your tax transition plan is going to go. The market’s going to do something. It’s going to change. You’re going to get punched in the face. You know, who knows? And so it’s less about, you know, let’s try to, you know, have hours of data entry for the advisor turn into the perfect here, how we get from A to B path and more about how we use the data that we do have to, to educate the client on the fact that you know, now that we’ve driven urgency, which is a little bit rare to drive that level of urgency from A to B, right? Usually it’s, don’t know, I’ll trust you and try not to surprise me with taxes. Our proposal system kind of drives that like, well, why can’t I be in that portfolio tomorrow? So, you know, like we just need to better illustrate for them using a range of outcomes rather than not trying to predict the future, but to use a range of outcomes that go, look, if we go gradually, tax impact this year could be somewhere between here or here, and we’re gonna get your risk from here to there and your assets might look something like this, or we could go more rapidly to get you to target and your tax impact could look somewhere from here to here.

(21:20)
It’s not about creating the tax transition plan that’s gonna get punched in the face tomorrow. It’s about having the client see and understand, know why we’re not going from A to B overnight.
And I can trust my advisor to do it in a way that makes sense because clients just need to be educated even that there are certain tax impacts sometimes. And so that’s kind of how I think about future of tax transition offering from a client education lens as we would want to do it.

Steven Jarvis, CPA (21:438)
Yeah, that’s super interesting. I love the client communication side of it. Like there’s so many opportunities to better educate clients. And it’s not just because, well, I we’re not trying to make clients experts in these things. There’s a reason they hire professionals. They don’t want to be experts. But we’ve got to accept as professionals that it’s our job to at least articulate it in a way that it makes enough sense that they see the value proposition. Because I think too often advisors, whether that’s financial advisors, CPAs, financial professionals in general, I think..Some of them had this tendency to want to prove how smart they are. And it’s like, hey, let me give you my dissertation on why a Roth conversion makes sense. And at the end of it, you’re probably just going to be overwhelmed and agree with me because you liked me to begin with or whatever it might be. And so I think that client communication piece is really important. The other side of it that I see advisors often need help on, and Justin, you don’t have to tell me how much of this is built in now versus somewhere you could go. Or maybe I’m just giving you product ideas here, and you’ll tell me later if you need to sneak my signature into the bottom somewhere. But if I could wave a magic wand, I would love to see a tax tool that incorporate, you mentioned Roth conversions is one of the places that you’re gonna do more on. I want it to not only provide an effective way for an advisor to effectively communicate the value proposition and why we’re doing this, the pace, all those kinds of things. I also then want it to turn around and give the advisor and their team the step-by-step, the checklist, the process for here’s how we actually get this thing implemented. Because I think we’re at a place where some of these topics, including Roth conversions, they get enough attention and there’s enough tools that will high level say, hey, here’s what this means if you fill up this bracket, or here’s what it means if for 10 years we do this amount a year. But I still see advisors missing, how do I communicate how the taxes get paid? From what account do they get paid? How do I make sure that the overall asset mix I’m looking for across different types of accounts is still reflected after we do this Roth conversion, does it make more sense to do it from spouse A or spouse B first? Is the mix 80-20, is it 50-50? Like some of those really like mechanical things that go way beyond really what the client cares to understand upfront, but that we have to understand and execute to really do best by our clients and to make sure this stuff all gets reported to the IRS correctly. So you tell me where you’re at on that journey or if that’s some place you’re already headed or if I just enshrined myself into the Roth conversion tool by giving you some great ideas here.

Justin Boatman (24:05)
Yeah, yeah, great ideas and send me your signature so we can hide it somewhere.That’s certainly, do want to go, deeper in there, but we will always say, Hey, we are client illustration first, right? Let’s start with getting the client to see and understand what your plan is. And then from there, that’s where our users tell us, Hey, here’s where you can actually help me a little bit in the back office. It’s like the way we started with risk being. Here’s the story you tell to your client in order to win the plan that you already know what it is. And then research is sort of like what kind of came out of that as advisors going, hey, I actually tinker around with this tool on my own quite a bit. So we will always start with client illustration in mind and then go deeper to help the user. And so that’s kind of what we’ve done here as well. I think look like, as much as I love, especially me talking future and talking roadmap, mean, what we’ve, you very proud of what the developers have done to date. And I will say this is like the most popular product thing that we’ve done in a long time. And it’s only been a few weeks now, but advisors are using it, loving it. And look, that’s the benefit of a software subscription, Is, you you sign on, our price is still down in the 70 something dollars a month. And so you sign on to that and lock a price into a contract. You get the benefits of all the future things that we build. But boy, think what we’ve got today is something we are absolutely loving hearing all the positive feedback from users from.

Steven Jarvis, CPA (25:28)
That’s super exciting. I love that commitment to kind of your like origin story of, like before anything we’re about the client experience and like we’re going to tag things on there, but that’s also, I mean, it’s easy to do in life, especially in software development to get distracted by shiny objects all the time. And that the people who consistently deliver the best results are those people who can understand, like here’s what made us successful and here’s the, the theme we’re going to commit to. So Justin, I could nerd out on this stuff for hours with you. I got to make sure that I’m being respectful of our audience. I’m watching the clock here. So before we completely run out of time, let people know how they can learn more if they’re interested in what you’re talking about.

Justin Boatman (26:01)
Yeah, absolutely. We’re at nitrogenwealth.com. Reach out. We like to call it the industry’s best advisor-facing team. And so anybody can hop on a call and help you out at nitrogenwealth.com. AI Tax Center is our new product for advisors who want to become more tax aware and have some friendly client deliverables. And so that’s how you can get hold of us.

Steven Jarvis, CPA (2 6:21)
Justin, I certainly appreciate that. And in part because I’ll be there, but the Fearless Investing Summit in February, I believe Colorado, right? That’s where we’re getting together.

Justin Boatman (26:30)
Yep, we’re in Denver. Summit, it’s always been called the Fearless Investing Summit, but it’s kind of literal this time. We’re up a mile high.

Steven Jarvis, CPA (26:35)
Yeah, that’s super exciting. And while I get excited about speaking in a lot of places, when I was asked what I wanted my topic to be, my response was like, let’s go with the title of Taxes Suck. Here’s what you can do about it. And if you need to water that down, if that’s not quite your audience, please let me know. And they said, Nope. And it’s live on the website. So my session is called Taxes Suck. Here’s what you can do about it. So I’m super excited to come and get to just really, Open and honestly, like talk about this reality that clients face and what you can do about it.

Justin Boatman (28:03)
Love that. I will not miss that session. That’s an awesome title and I will see you in February.

Steven Jarvis, CPA (27:08)
Awesome, well Justin, really appreciate your time. It’s great to hear the insight. It’s always exciting to see what new tools are available on such an incredibly important topic. And for everyone listening, thanks for being here. Until next time, good luck out there and remember to tip your server, not the IRS.