COVID-19 Highlights Financial Planning Opportunities This Tax Season
With the tax season underway, I encourage my fellow tax and accounting professionals across the country to thoroughly examine the potential opportunities to add more value for clients by hosting ongoing discussions about finances. personal with a step-by-step planning process – especially since COVID-19 has highlighted the role we play for our proactively working clients and how important that role is in keeping their finances on track.
Communication is essential in the planning process, especially during the uncertain times we are currently experiencing. When I spoke with clients throughout the pandemic, whether it was market fluctuations, Paycheck Protection Program loans, or opportunities to cut payroll taxes like credit employee retention, the financial planning relationship we had already established gave me an advantage in best assisting them because I already understood their big picture, which allows me to answer questions and use the opportunities much faster. This proactive planning relationship also allows me to do their tax returns and tax planning much more efficiently.
A proactive and holistic client-advisor relationship is a real financial difference maker. Clients who only meet with their tax professional once a year may find a few nasty surprises in store when they file for 2020. And many of these issues represent missed opportunities. For example, customers who were able to qualify for the Employee Retention Credit 2020 last year but did not receive the money last year when they needed it, may find that to get it now , they will have to produce amended payroll tax reports for last year. Additionally, an established counseling relationship positions a client well to use new and limited programs. The first wave of PPP loans disappeared very quickly. Many small business owners who did not yet have an advisor missed it.
If you’ve ever been frustrated because you wanted a client to come to you before making a financial decision instead of showing you the receipts, maybe it’s time to stop counting missed opportunities after the fact and consider expanding your relationships with customers.
Many of you may already have clients where their tax relationship has turned into a financial planning relationship, almost informally without even realizing it. It often begins by answering questions such as “How do I sell my house for maximum tax efficiency?” or “How can I pay for my children’s college?” And throughout the past year, the impact of COVID has prompted tens of millions of Americans to make decisions that will impact their 2020 taxes, like filing for unemployment, operating retirement accounts for money, sell a house, adjust their stock portfolio or even take a side gig. Think about opportunities to help these clients manage their future financial decisions by building a proactive plan now.
A formalized customer relationship financial planning helps you answer these more important questions. As the pandemic continues to impact Americans’ financial lives, the ability to offer proactive advice will help things run better and save them money for years to come. Many of your clients who previously didn’t think they needed a financial plan will likely see value in working with you to develop one after the uncertainty of the past year. Just start with a list of their assets and liabilities. Talk about the goals they would like to achieve. See if there is a gap and see if they would like your help in closing that gap. Financial planning is simple management of variances.
Market volatility in 2020, especially in the first half of the year, could have a big impact on a client’s overall financial health. How many of your customers will come to you this year with an untimely capital gain, or worse yet, a loss from a panicked sale? You can be a sounding board for your clients, giving them peace of mind and general education without actively managing their money. Be aware of what you can and cannot do in connection with the exclusion of the accountant from registration as an investment advisor. Many CPAs, for example, find they can deliver more value to their clients by signing up and providing investment advice, relying on compliance experts to manage their registration and ongoing requirements.
Knowing about upcoming stimulus programs to consolidate affected sectors allows you to reassure clients with longer time horizons that their portfolios have time to recoup what may have been lost. As the markets were extremely volatile in 2020, many clients would likely have appreciated the time horizon outlook and risk tolerance. With the economic uncertainty lingering, who among us would be surprised to see the volatility continue?
The significant uncertainty that has been introduced into daily life over the past year is unprecedented. However, the truth is that there will always be uncertainty and people will always have the benefit of someone they trust to help them get through this situation. You are already aware of the latest financial legislation, pandemic assistance programs and tax possibilities; Now you just need to ask the questions and have that proactive conversation that will add value and security to your customers’ lives.
When you start making appointments this tax season, I encourage you to make a list of 15-20 clients whose lives would benefit from a little more financial foresight, or whose lives you want to make sure you don’t miss out on. timely help opportunities. great hardship ever again. Maybe they have a little more complicated tax situation or are at an anxious inflection point in their life, like getting married, buying a house or having a child, or maybe they are starting to see the light. at the end of their career tunnel and they need to make sure their financial house is in order for retirement. When you get together to get their taxes in order, discuss the possibility of having a conversation in a few months about the strategies and programs available to them. So the next time the uncertainty arises, your finances will be covered.
If you find yourself having annual ‘after the fact’ conversations about the opportunities they’ve missed this tax season, explain to those clients the benefit of making a plan and hitting the grassroots all year round. to make sure it’s on track. Start using the knowledge you have today to save them money in the years to come and add value to the future relationship.
The pandemic has reminded us that life is unpredictable and it’s hard to know what lies ahead. But when it comes to times of financial uncertainty, understanding the options and having a plan to address them is a huge plus. It is in your power to help make this happen for your tax clients.