Developing an integrated plan
By: Doug Barber, CFP^®

You’ve worked hard to develop your assets — but sometimes the job of managing them can also seem like a lot of work.  Between tax planning and preparation, investment management, retirement planning, risk management, estate planning and day-to-day cash flow management, you may be working with more advisors than you want to and still not have a clear picture of your financial future. 

Tax management is an important way for a wealth advisor to help bring a client’s financial goals into focus. It’s often more important than investment management.  In many client situations, it should be a constant part of the conversation.  That’s why it is important for your wealth advisor and your CPA to work in unison to create a plan that takes all factors into consideration, including taxes.  By working with an integrated tax and wealth management provider, there’s no need to go to three different professionals for financial planning, asset management and tax advice and preparation.

But more important than convenience is the comprehensive nature of tax and financial planning.  Created independently, your tax and financial plans may actually be working against you.  By integrating these plans, you start to gain the confidence of knowing that your tax and financial planning goals are working in unison to bring your financial goals into focus. Like framing a photo, it completes the picture. 

Let’s look at an example.  A couple had assets with one financial services firm as well as brokerage accounts with another advisor and investment advisory accounts with a third. This couple was planning to retire and though they had a plan to help ensure that their income would not run out during their lifetime, they wanted a second opinion.  A review of their existing plan showed it had a number of poor assumptions and, most notably, the cost-basis and tax implications of businesses and properties they were planning on selling to finance their active retirement had been ignored.  

A comprehensive analysis of their situation was prepared taking into consideration the tax implication of the sales as well as the potential taxation of their investment portfolios as they began to sell assets off. In the review, it was also apparent that their investments were improperly structured for their tax situation.  They had equities in their IRAs and bonds in their taxable accounts – highly inefficient based upon their high tax bracket.  Their portfolio was also significantly more aggressive than was prudent to support their lifestyle.   The wealth manager worked with a CPA who was fully aware of all the elements and restructured their accounts to provide a more tax-efficient and conservative allocation while at the same time increasing their probability of meeting their goals.

Another example that comes to mind is a client who faced severe health challenges and was looking to retire sooner than expected.  He wanted to sell his business and needed to find a way to structure the sale to maximize the amount available to keep up his family’s standard of living. His CPA and wealth manager worked together to structure the sale in such a way that the projected after-tax proceeds combined with other investment and retirement assets the client owned would be sufficient to provide for his lifestyle.  This gave both he and his wife the confidence they needed to sell the business. On top of this consultation, strategies were also recommended to help them increase their emergency fund, provide for tax-efficient investments and reallocate their portfolio to a less aggressive posture. The result: they were able to achieve their goals with less volatility in their investments.

Integrating your tax and financial planning not only creates convenience and confidence; it also creates real value. Contact your financial advisor to develop a plan that lets all your plans work together to capture your financial picture. 

Securities offered through Royal Alliance Associates, member FINRA/SIPC. Investment advisory services offered through Rehmann Financial, an SEC Registered Investment Advisor not affiliated with Royal Alliance Associates.  

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