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From, March 18th 2016

By Thomas Mingone

Increasingly, we live in a do-it-yourself world. YouTube videos walk us through simple home repairs that minimize the need for plumbers and electricians. Sophisticated robo-advisor algorithms allow self-directed investors to build and automatically rebalance their own portfolios. And user-friendly tax software from the likes of Intuit and H&R Block, supported by massive advertising budgets, exert more and more pressure on CPAs to preserve your current client base.

Today, more than ever, you need to bring greater value to each client relationship – continually reinforcing the advantages of your knowledge and experience, and seeking out opportunities to demonstrate those vital benefits. But how do you add value to your clients’ lives during the tax review meeting? Instead of merely crunching the numbers and preparing the tax return, how do you look at their 1040 in a way to help gain deeper insights into their financial picture – insights that will allow you to help them think about their wealth differently?

If you know what to look for, there’s a veritable treasure trove of critical financial information imbedded in each of your clients’ returns. Often, it’s information that may signal an opportunity to improve their wealth picture and, therefore, warrants further discussion. Whether or not you want to personally get more deeply involved in their financial planning, you at least have the chance to raise some of these key issues and opportunities, and point the client to a resource who can help.

Specific Line Items Lead to Deeper Conversations

A number of mutual fund companies provide “tax overlay” tools that can assist you in identifying precisely what to be on the lookout for regarding specific 1040 line items, along with the financial discussions certain red flags may trigger. For example, the age, number, and circumstances surrounding your clients’ dependents can spawn a host of discussions around education planning and the tax benefits of 529 plans, life insurance needs, and blended family considerations.

Similarly, a client’s interest and dividend line item can also provide valuable insights and identify important financial planning needs. A 50-year-old client who earns $400,000 annually yet only has $400 in interest and dividend income probably isn’t doing enough to accumulate wealth. Conversely, an excessively large amount of interest and dividend income may be a warning sign that the wealth the client has accumulated isn’t structured in a tax-efficient manner.

Just a few simple questions can then unearth opportunities: Tell me a bit about what your investment portfolio looks like. Why is there so much taxable interest? Have you thought about adding an allocation to municipal bonds or talking to your financial advisor about harvesting losses at the end of the year to help offset taxable gains?

Many other pieces of data can also yield valuable conversations. Social Security benefits and pension and annuity distribution line items can draw attention to inefficient or ineffective retirement income planning and management. Large capital gains may signal a troublesome concentrated equity position. And the sudden appearance of alimony paid or received likely indicates a critical life change that will require a total re-evaluation of your client’s financial plan.

If your client has a property that he’s been looking to sell and also has a big loss carry-forward, it’s an opportune time to say, “Hey, I know you’ve been reluctant to sell because of the tax bite, but given last year’s sizable loss carry-forward, maybe this is an opportunity to take advantage of a down investment year to sell that property and offset some of the gains.”

The Value You Add Hinges on the Quality of Advice

Whether you send them back to their current advisor with valuable ideas and discussion points, refer them to a financial advisor with whom you’ve formed a trusted professional alliance, or make a strategic business decision to internalize financial planning services, these are the types of deeper client conversations you want to engage in.

At the end of the day, it’s all about advice – and the quality of that advice. Software can do all the number crunching, but advice is something that’s only valuable when given on an individual basis. And that only comes from a more intimate knowledge of your client’s specific circumstances and situation.


Thomas Mingone, Managing Partner of Capital Management Group of NY (“CMG”), offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC, offers investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC, and offers insuranc e and annuity products through AXA Network, LLC. CMG is not a registered investment advisor and is not owned or operated by AXA Advisors or AXA Network.  CMG, AXA Advisors and AXA Network do not offer tax or legal advice.

This article was originally approved for use in March 2016 as PPG-113004 and certain information presented may have changed. For more current information please contact Capital Management Group.