Learn About the Fundamental Principles of Tax Planning

In the financial services industry, and most other industries, the goal is to provide value to your clients. In today’s financial landscape, tax planning has emerged as a growing service. In fact, according to the 2023 Herbers & Company Service Market Growth Study, tax planning is the most demanded service among clients with at least $250,000 in household assets. As such, there has never been a better time than now for financial advisors to familiarize themselves with the key concepts of tax planning. Fortunately, The American College of Financial Services and tax expert Jeffrey Levine cover these key concepts in Principles of Tax Planning for Financial Advisors.

Why Should You Care About Tax Planning

As Levine points out, the ability to offer sound tax planning advice is a valuable differentiator. Clients are unique individuals, but they all share one common trait: “All clients have the common thread of wanting to pay as little in taxes as possible.”

In addition to guaranteeing that advisors have desirable advice that clients want, knowing the principles of tax planning offers several other advantages as well. Tax planning aligns the interests of the advisor and the client, creating a unified goal of minimizing tax liabilities.

Furthermore, being a strong tax planner offers a financial advisor a significant amount of market resiliency. Paying minimal taxes is a common goal regardless of market conditions, and by mastering these principles, financial advisors will have something to offer clients in any market.

Ultimately, financial advisors should care about tax planning because it is a universal goal shared by nearly every client in nearly every situation, regardless of circumstances.

Key Principles of Tax Planning

Levine goes on to dispel several tax myths and share key insights that are important for financial advisors to remember as they look to help their clients achieve their goal of minimal tax payments. Included amongst these topics are several of the following key ideas:

• Tax rate and tax bracket are not the same. Levine points out a common misconception in tax planning, stating that advisors can often fixate on what tax bracket a client is going to be in. However, as Levine states, “The tax bracket is just one of the components, if you will, that goes into informing what the client’s true tax rate is.”
• There is no such thing as permanent when it comes to taxes. When arguing this point, Levine begins by emphasizing how often tax law changes. Essentially, even laws stated to be “permanent” are only permanent as long as Congress doesn’t change their mind. For this reason, Levine believes that advisors must take advantage of provisions that exist today, because: “We don’t know how long it will stick around for. What’s here today should be used when we have that opportunity.”
• The lowest lifetime tax bill wins. Obviously, everyone wants to pay as little in taxes as possible. However, we all have to pay them eventually. Levine argues that instead of looking to pay the least taxes year after year, advisors should plan for their clients to determine their payment schedule based on rates, saying, “The name of the game is simple: Pay taxes when your rates are the lowest.”

By mastering these principles, advisors can help clients achieve lower lifetime tax bills and navigate the complexities of tax laws with confidence. Levine goes into greater detail on these ideas and more in Principles of Tax Planning for Financial Advisors, available exclusively on Knowledge Hub+.

To access this learning opportunity, visit Knowledge Hub+ and unlock the potential to transform your financial advisory practice today.

To learn more about the Tax Planning Certified Professional™ (TPCP™) program, join the waitlist.