Click Here To Listen To The Retirement Tax Services Podcast


  • How a CPA turned Advisor created a tool used across the industry
  • All the aspects Advisors should be considering to do truly tax-efficient investing
  • Details of Sheryl's upcoming keynote presentation at the RTS Summit


Steven’s guest on today’s episode is none other than Sheryl Rowling, a fellow CPA and creator of Morningstar’s Total Rebalance Expert Software. Sheryl started her career preparing taxes and then saw the saw of tax planning and embraced. While she didn’t set out to create an industry-wide tool, her frustration with existing tools and her commitment to delivering massive value to clients led her to creating just that. Sheryl now works as the Editorial Director, Financial Advice for Morningstar and will be a keynote speaker at the 2023 RTS Next Level Tax Summit.

Ideas Worth Sharing:

There's a certain amount that can be automated and you can definitely have admin run the program and take care of proposing trades and things like that. But the settings and how you basically set everything up on a overall level… Click To Tweet It's the proactive steps, the things that we intentionally do, even if sometimes they feel a little uncomfortable, like intentionally paying more taxes now so that we're setting ourselves up for the future, that's what really… Click To Tweet Number one is applying that consistent investment strategy, but number two is tax efficiency because that is the way to add risk free alpha. Taxes take such a huge chunk out of income and growth that if you're able to reduce… Click To Tweet

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Read The Transcript Below:

We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.


Steven (00:49):

Hello everyone, and welcome to the next episode of the Retirement Tax Services podcast, Financial Professionals edition. I am your host, Steven Jarvis CPA, and with me on the show today, I have a fellow CPA, Sheryl Rowling, who’s the editorial director for personal finance at Morningstar. Sheryl, welcome to the show.


Sheryl (01:09):

Thank you so much. I’m happy to be here.


Steven (01:12):

Yeah, well, I was really excited to be able to have you on as a guest not the least of which is that you’re actually going to come to our conference this fall in September in Las Vegas and speak as one of our keynote presenters. But you have an extensive background in the industry. You’re a CPA, you’ve done financial planning, you now work for Morningstar, but there’s kind of some other pretty big events along the way that we’d like to get into today, but just I so appreciate your contribution to the industry that really excited that you’re here with me.


Sheryl (01:44):

Oh, thank you so much.


Steven (01:46):

So, Sheryl, for the audience, for the listeners give us just a little bit of background as far as, you know, your time as a financial planner and how taxes fit into the picture for you.


Sheryl (01:58):

Sure. I started out as a CPA doing tax work, and that was my main focus. Eventually I started my own firm and I realized that I was doing a lot of tax planning and then when you look at tax planning, it’s hard to look at that in a vacuum. And so I started doing financial planning as well, and during that time, I jumped through some extra hoops. I got my MBA in finance, I became a personal financial specialist and got different licenses, et cetera, so that I could actually offer financial planning services as well. And I enjoyed that, being able to help people with their whole financial picture. And then when it came to investing, my clients said, well, why can’t you invest our money too? So I jumped through some more hoops and I was able to offer investing and basically handle their whole financial needs in one firm. And that’s really how my career morphed.


Steven (03:10):

Yeah, it’s such a good example of how everybody knows they have to have help with taxes, that taxes have to get addressed every year. Not everyone starts out assuming they’re gonna work with a financial planner someday. So from a business standpoint, as advisors look to grow and, and how they serve clients and how they attract new clients, taxes is such a great way to set yourself apart. And even though there have been people that have figured this out for years now, it’s still the exception in the industry. There’s more and more tools, there’s more and more education, but there certainly isn’t universal. Now, Sheryl, as you were going through that as your career morphed as you said I know that tax or asset location became really important to you and actually kind of became somewhat of a defining part of your career as you look to solve how to effectively do that.


Sheryl (04:01):

Right. I mean, it was more than just asset location. It was tax efficient investing as a whole. Which would also include choosing high cost lots to sell so that you would minimize capital gains, looking at not recognizing short-term gains, making sure that everything is the long-term gain, minimized as much as possible, tax loss harvesting, and then the location optimization, which really centered around putting the income, generating assets in retirement accounts so the taxes would be deferred, putting appreciating assets in the taxable accounts so that taxes would be deferred, and then eventually taxed debt, capital gain rates, and then putting the highest growth assets in Roth accounts so that you really make the most out of the permanent tax elimination. So trying to coordinate all of those multiple pieces and doing a good job of it for clients was really extremely difficult using manual resources, even using spreadsheets, it’s was still crazy in terms of the amount of work you had to do.


Steven (05:27):

Yeah. And as you describe all those different things that you’re looking at, which I love how thorough that you were being I mean, those are things that get talked about all the time. It’s really easy to find articles or Google information on these topics, but really what you are speaking to is, okay, but how do we make that a reality? It’s one thing to talk about we should invest in a tax efficient manner, but when you’re talking about serving a variety of clients in a variety of circumstances and then trying to manage all of their different investments and actually being confident that you have followed through on all of those great ideas. I mean, you’re absolutely right that trying to manually do that in a spreadsheet becomes incredibly cumbersome and wildly ineffective. So, how did that go from, hey, manual’s not the right answer to you creating a solution from that for that?


Sheryl (06:13):

Well, there was actually an in between step, Steven. I had heard about automated rebalancing. And at the time there were two solutions out there. One was I-Rebel and the other was Tamarack. And based on what I read, I-Rebel was the superior program. And so I spent a huge amount of money for my fairly small firm at the time to implement I-Rebel because I knew I had to do a good job of managing for taxes for my clients. But I also knew that it was so labor intensive. I couldn’t do an ideal job. So I did take the jump and implement I-Rebel, and it took two of us 20 hours a week for six months to implement that. And it was grueling. I would go to sleep dreaming spreadsheets, it was absolutely horrendous. But once we got it done, our life changed.



We were able to do what we needed for clients and it was something we could take a look every day and it was a total new world. So then the question is, why didn’t I just stick with that? Yeah, I mean, I saw that in your eyes. The reason why we didn’t stick with it is because I-Rebel got acquired by TD Ameritrade and we did not custody at TD Ameritrade. And I was concerned that we wouldn’t have access to it and or it would not continue to be supported the way I would like it to be supported. And when I looked at that situation and I thought, wow, there’s so many firms that are more like me than the giant firms because you know, at the time I had two or 300 million under management and there’s, for the most part, firms of that size are not going to invest the amount of time and money we did in doing I-Rebel.



And I thought that tax management was something that should really be accessible to all advisors so that all their clients could benefit. And I looked at the process that we went through in implementing the solution and it was horrendous. And I didn’t understand why it couldn’t be done easily and have more functionality. And I ended up, you know, finding a programmer and we created something that could be implemented within one to two weeks that was not go to sleep dreaming spreadsheets. And it handled every aspect of tax management and we could sell it at probably 20% of the cost of the other program. So it made it affordable and actually implementable for any firm. And, you know, that was something that I was really happy about and my thought the whole time was that if it worked for me, it would work for other advisors.


Steven (09:52):

Sheryl, you so casually describe that, like just anybody could have gone out and done that, but to take something that when you implemented the first solution took you six months or two of you six months, 20 hours a week. I mean, that is a huge undertaking. You’re absolutely right. That’s a massive barrier to entry for most advisors to be able to effectively handle just an endeavor like that to be able to benefit their clients. Cause I think it’s really important that you mentioned that ultimately this is about how we serve clients, and so, but appreciate the insight that you had the idea and the experience, but, you had to go and find a programmer. I mean, sometimes we gotta leverage other people, but this wasn’t just a little bit of a side project. I mean, this is now turned into something that’s widely available across the industry. This is how you ended up at Morningstar. I’m not trying to jump too far to the end, but you’re casually talking about something that’s really an incredibly big deal.


Sheryl (10:42):

Yeah, when I look back on it, I do realize that, and I just realized I didn’t mention the name of the software, it’s Total Rebalance Expert, but at the time I went into it very naively thinking, well, this won’t be that hard. It turned out to be pretty hard. And the tough part about it was running a technology company, I’m not a technology person. I know how to run a company, but I’m not a technology person. And now to suddenly be in the FinTech world and having to deal with marketing and sales and publicity and serving a totally different type of clientele than financial planning clients, it was a huge leap. And what I thought was going to be, oh, this won’t be any big deal, turned out that I essentially worked two more than full-time jobs for about seven years.


Steven (11:45):

Wow. Yeah. That’s a huge commitment, but a game changing result, it’s very impressive that you were able to follow through on that.


Sheryl (11:52):

Thank you.


Steven (11:53):

So Sheryl, one of the things that I find talking to advisors, I spend all my time talking to advisors about tax planning. Everybody is looking for a software solution for everything related to taxes. And there are some great tools out there. And this is a perfect example, but I would love your insight on what do you see as the balance between having great tools but still having an advisor who can use those tools, who can interact with the client? Where do we find that balance between having the right tool and having the right operator, if that makes sense?


Sheryl (12:21):

Well, it’s like with everything, you know, garbage in, garbage out, you know, just like anybody has the ability to buy TurboTax and do their own taxes,  if you have anything other than the most simple type of tax return, you really need a CPA who is familiar with all of the different opportunities and traps so that they can make the most out of your tax situation. And the same thing goes for advisors using tools. You know, there’s a certain amount that can be automated and you can definitely have admin run the program and take care of proposing trades and things like that. But the settings and how you basically set everything up on a overall level and a per client level and a per account level, that’s where it really makes all the difference. And so to have a sophisticated tool in the hands of someone that is very unsophisticated can be quite dangerous. But the beauty of having a good tool is that your knowledge can be translated into action without an undo amount of burden. And that’s really what I was looking for.


Steven (13:50):

Such a great way to look at that of your even if it’s limited knowledge, being able to translate it into action. Yeah, we talk about that all the time on the podcast of really the information that has the most value is information we put into action. So I really like that that’s the way that you approached it.


Commercial (14:04):

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Steven (15:06):

Sheryl, most advisors are not CPAs by background. They didn’t spend years doing taxes, although I always appreciate meeting people who have, so for listeners who don’t have that extensive tax background, I mean, what do you see advisors doing who are the most successful at improving their tax knowledge, their tax skills, what they’re able to do with their clients on taxes?


Sheryl (15:27):

Well, I think it’s a good idea to have a working knowledge of the tax areas that impact investing. And I think that most advisors who have gone through some type of educational program, whether it’s a PFS program or a CFP program they have gotten some tax training. And the areas that are most critical is understanding the difference between long-term and short-term capital gains. Understanding how capital losses work, understanding how cost basis impacts the amount of gains that you’re recognizing, also how the different types of accounts are taxed. And then finally, you know, just a general concept of tax brackets and what that means for different types of accounts. And you don’t have to be proficient at filling out tax returns to understand that someone in a low bracket should consider doing Roth conversions or someone in a high bracket who has recognized significant capital gains should be looking for tax loss harvest opportunities.



So just knowing those basic concepts and then being able to customize the application for each of your clients is what’s really going to add a huge amount of value. And to me that is one of the key values that advisors can provide. I mean, the main value that advisors can provide is maintaining a disciplined investment strategy, you know, preventing clients from saying, I can’t take this anymore, I’m gonna go to cash. So number one is applying that consistent investment strategy, but number two is tax efficiency because that is the way to add risk free alpha. Taxes take such a huge chunk out of income and growth that if you’re able to reduce taxes, you’re able to really increase what your clients take home and make a significant impact on their bottom line. And it’s risk free. You don’t have to try to pick the winners in the stock market. You do things tax efficiently and you’re going to add more value doing than anything else.


Steven (18:09):

So much great insight in there. It definitely comes up often that taxpayers that clients don’t really appreciate just how expensive taxes will be over their lifetime. I often talk about, so Retirement Tax Services is the name of the podcast, name of our company. We talk about your retirement tax as that six or seven figure bill the IRS is gonna ask you to pay throughout your retirement. And when we talk about six or seven figures, we’ll have clients, we’ll have advisors who say, nah, I can’t possibly be that much. And it’s really not for someone who’s done a good job saving for retirement, it’s not that hard for me to do back of the napkin math on how you could get to six or seven figures in taxes that you are gonna pay over your 20 or 30 or 40 or more years of retirement. Well, we’ll hope for the best there. I don’t want my tax strategy to be let’s have a short retirement and that way I don’t pay very much in taxes. I’d much rather to your point, do these things as tax efficiently as possible to help clients have more control of their hard-earned money. Take the IRS out of the equation as much as possible and say, how do we set you up to do as much as you can to accomplish those goals that are most important to you?


Sheryl (19:14):

Absolutely. I couldn’t agree more. I mean, I always tell clients that there’s four people that can benefit from their money themselves and if that’s all they’re caring about, then we try to go for poison pill plants so they can spend all the money that they have and spend their last dime on their deathbed. And then they’ve made sure that their money benefited them. The next is their kids or their heirs. The third is charity and the fourth is Uncle Sam. And I have not found a client yet who wanted to prioritize Uncle Sam. And so that’s where the work comes in. But that’s also where the biggest rewards come in as well.


Steven (20:00):

Well, I like how you’re explaining it to clients that way. We definitely have that conversation often with clients, one of the things I like to remind people is there are no patriotic awards for tipping the IRS. And I’ll get people who will ask me like that. I’ll get people who ask me how I can talk about taxes all the time and not wait into politics. And I say it’s really easy when I talk to people one-on-one, they always want to pay less tax personally, cuz I’m like you, I’ve yet to meet the person who voluntarily wants to leave more for Uncle Sam.


Sheryl (20:30):

That’s exactly right. Exactly right. That’s why it’s important to have people like you working with their clients on retirement because it can make a huge difference in terms of success or not success.


Steven (20:44):

Yeah, absolutely. Sheryl, you are a lot of time in this industry working with financial advisors, creating content for financial advisors. What do you see as what comes next I guess with tax planning and financial advisors? What should listeners be thinking about as far as things that they need to make sure they’re incorporating or things they’re on the lookout for?


Sheryl (21:05):

I think there’s a few things. My overall background is to say that tax rates are only going to go up. They’re not going to get lower than they are today. So I think you have to be looking at everything through that lens. Postponing taxes in the long term seems to always be a great way to go until you realize that you’re going to have to pay the piper at some point and that could end up being very expensive if you have put off everything until the tax rates go up. And so I think you always have to have that in the back of your mind. I think that what’s out right now in the media and what investors are aware of is tax loss harvesting because a lot of the automated investment platforms do tax loss harvesting on a regular basis. And while that is helpful, it’s not the entire solution, it’s only a solution in taxable accounts where you have pretty typically continued contributions into the account so that there are continued tax loss harvest opportunities.



But if you have an account where the person is not continuing to add to it and it’s been around for a while, the embedded gains are probably going to really minimize the amount of benefit you can get from tax loss harvesting. And so for most consumers as well as some advisors, tax loss harvesting is the pinnacle of tax efficient investing. And I think that’s just one small piece of it. What you really have to look at is avoiding what I would say mistakes, which would be recognizing short-term gains unless you have to, because you’re gonna pay twice as much tax than if you wait till long-term. Also, choosing low cost lots when you’re selling so that you’re recognizing gains early when you don’t need to. And also recognizing that it might not be the end of the world to recognize more income now as to later, whether that’s taking advantage of low tax rates, whether taking advantage of low tax rates in order to do Roth conversions or simply spreading out the taxable income so that you’re not in the highest brackets.



If you have IRAs and you decide to wait until as long as possible to take RMDs, maybe you should have been taking some money out when you had lower tax brackets so that you’re not hit with the highest brackets when you have to start taking it out. So there’s a lot of moving pieces and I think that’s where advisors can really add a lot of value. And unfortunately what I see a lot of advisors and investors focusing on is what is the gross return that their accounts are experiencing year by year. And the returns are basically going to be market returns unless you try to do something fancy, in which case you’ll get less than market returns. But if you get market returns, they’re going to be reduced by fund costs and transaction costs and advisor’s fees and taxes. And so just reporting a gross return, I would rather report to a client, you got 6% last year, but you paid, you know, less than 5% of tax on that versus you got 8% but you had to pay, you know, 40% tax on that. You know, so focus on the gross return as opposed to what actually hits your client’s pocket is a trap for both investors and advisors.


Steven (25:39):

Sheryl, I really appreciate all that insight. There’s so much more nuance to taxes, to tax fish and investing than a lot of headlines or a lot of the internet would really let on that. I mean it takes a specific and proactive approach to really make sure that clients are ultimately betting benefiting from this. One of the things that I tell advisors and taxpayers both is that best, easiest way to get killed on taxes is just to do nothing and let it happen to you. To your point, it’s the proactive steps, the things that we intentionally do, even if sometimes they feel a little uncomfortable, like intentionally paying more taxes now so that we’re setting ourselves up for the future, that’s what really starts to make a difference over time.


Sheryl (26:20):

Absolutely. And, you know, the example of that is with Roth conversions, you can do all of the calculations and show a client how much money they’re going to save. And if the bottom line is they don’t wanna write a check to the IRS, it’s not gonna do any good. So it’s up to the advisor to educate as well.


Steven (26:40):

Yeah, totally agree. Well, Sheryl, we can certainly spend so much more time going into detail about tax efficient investing and these different nuances and that very fact that we could go into so much more detail is why we’ve invited you to come speak at our conference this fall. So grateful that you accepted that and are gonna be part of that event. That’s in Las Vegas in September. There’s a link in the show notes for people to get registered or go to Sheryl’s presentation on tax vision and investing will just be one of the great sessions that we have there. So Sheryl, again, really appreciate you being here today. Really appreciate that you’re gonna be at our conference this fall and again, I’m just so grateful for all the impacts, all the contributions you’ve made to the industry as a whole.


Sheryl (27:24):

Well, thanks so much Steven. It’s been my pleasure and I look forward to seeing everyone in September.


Steven (27:29):

Yeah, it’s always great to be able to do these things in person. For everyone listening, until next time, good luck out there. And remember to tip your server, not the IRS.


We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.


The information on this site is for education only and should not be considered tax advice. Retirement Tax Services is not affiliated with Shilanski & Associates, Jarvis Financial Services or any other financial services firms.

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