In the wealth-management industry, the ability of firms to predict, identify, and adapt to changing client preferences is a key competitive differentiator. In some cases, it can be the difference between a firm’s long-term survival and its eventual failure – a reality that some firms are unlikely to realize until it’s too late to do anything about it.
For the last few years, the list of shifting client preferences is long. Few, however, are as prominent as the growing demand for integrated tax-preparation services.
The term “wealth management” reflects the long-term evolution of “investment advice,” which technically and legally refers to advice regarding securities. Inherent in the former term is a client expectation around not only portfolio management but also financial planning and, increasingly, services that were once thought to be “ancillary” but increasingly are preferred or even demanded by clients.
In its ongoing research into wealth-management client preferences, McKinsey & Company found that preferences for “holistic advice” increased substantially in recent years, rising from 29% in 2018 to 52% in 2023, reflecting a substantial shift in client expectations toward broader, integrated service offerings.1
As part of its research, McKinsey also directly asked clients: “What services would you or do you find most valuable if provided by your wealth institution?” Tax prep ranked among the most valued services, cited by approximately 17% of respondents, second only to legal services at 19% and well ahead of lending and banking services at 10%.2
Bain & Company conducted a private survey of 1,000 high-net-worth and mass-affluent consumers and found that, in 2025, among services that are not currently considered table-stakes services, consumers of financial advice would find the most value in tax-prep and banking services. In contrast to the McKinsey survey, legal services were lower on the list in Bain’s survey results.
To be clear, we’re not talking about tax-planning services here. Tax prep and tax planning, while related, are not the same thing. In most cases, tax prep should include tax planning, but the reverse is often not true. Both the McKinsey and Bain surveys suggest that tax planning is now considered a core wealth-management offering. In fact, the Bain survey reveals that tax planning was even ahead of estate planning in terms of client expectations and perceived value around them.
This is of course sensible given that a focus on capital appreciation and preservation without a coordinated focus on the impact of taxes is a bit like focusing on filling up a swimming pool without thinking about the drains, leaks, and evaporation. At a minimum, effective tax planning can and should lead to “tax alpha,” or greater portfolio performance and wealth accumulation on an after-tax basis.
Tax alpha can be generated not only with basic techniques like tax-loss harvesting, tax-sensitive rebalancing, philanthropic planning, and optimized asset location but also with tax-sensitive investment strategies that, like tax planning generally, are outside the scope of this article.
In addition to the most important point – that clients increasingly want them – there are many reasons for wealth managers to add tax-prep services to their offerings.
The terms “holistic” and “comprehensive” have become clichés in the wealth management industry, and clients will be the ultimate judges of what they truly mean. At a minimum, however, offering tax-prep services on top of an otherwise full roster of services enables clients and their advisors to collaborate more regularly and effectively not just around planning but also around execution.
Preparing tax returns the right way is not a once-a-year activity. It involves multiple conversations a year regarding withholding, estimated taxes, tax projections, tax planning, and corrective actions or adjustments along the way.
Clients are more likely to value as indispensable an advisor who can offer multiple services and not just asset-management services. Bain’s survey results revealed that 90% of clients expect their wealth advisors to provide them with more than three types of services.
Along those lines, NPS scores were about 25% higher for clients using more than two services; and for clients who used more than one advisor, they generally invested more with the advisor offering more services. From a retention perspective, caution is advised for advisors with limited offerings. About 44% of clients surveyed said they would consider switching advisors for better service offerings elsewhere.
Given how undifferentiated many service offerings are, the ability to offer tax-prep services can be a key differentiator not only in retaining clients but also in attracting them. Industry trends suggest that firms are responding accordingly. In media interviews, RIA leaders have reported expanding their tax capabilities through acquisitions, partnerships, internal tax teams, outsourcing, and white-label solutions as part of broader efforts to support firm growth.
And the opportunities are not limited to attracting new clients. With respect to existing clients, tax prep can lead to increased wallet share not only through greater engagement but also through greater visibility into clients’ financial circumstances.
Clients whose tax prep is seamlessly integrated with their portfolio management and other wealth-management functions are more likely to optimize the tax benefits and avoid the tax pitfalls inherent in their financial circumstances.
Yet, there is also an indirect benefit to clients who are served by advisors that are more directly involved in the tax-prep process: those advisors are likely to be better educated and trained on tax-related matters, making them better and more effective advisors. Learning about taxes is an important part of becoming a financial advisor. Being involved in the preparation of tax returns is the next level of education, training, and experience.
Firms should offer tax-prep services if and only if they decide that clients are better served when they do so. This is the essence of their fiduciary duties to clients (and of this article). That said, firms that do offer these services can generate revenue that is uncorrelated to the financial markets, offering themselves greater stability and competitive positioning during periods of sustained market volatility.
In considering how best to serve their clients, wealth managers must consider the reality that growing client demand for quality tax-prep professionals has been exacerbated by a diminishing supply of those professionals.
According to a report by the AICPA, bachelor’s and master’s degree completions in accounting have declined in recent years. The same can be said of the number of candidates who passed the 4th section of the CPA examination.3 While the report offers some positive news as well, such as an increase in recent accounting-student enrollments and CPA candidates, the general trend seems clear: the accounting profession has not been growing the way it once did and must contend with serious challenges around talent.
This trend is confirmed by figures from the Thomson Reuters Institute, which reports that the top challenge faced by tax and accounting firms is hiring and retaining quality talent (26%).4 Among the four other top trends, three are also labor-related:
Three facts further exacerbate the problem. First, according to an analysis conducted by Bloomberg, there are over 300,000 fewer accountants in the U.S. than there were only a few years ago. Second, according to the AICPA, about 75% of CPAs have already reached retirement age. Third, even among the CPAs who are available, many do not have sufficient experience with more complex alternative and other investment strategies.
In Part 2, we will explore those challenges in greater detail and discuss the practical ways firms can overcome them.
Michael Nathanson is chairman and board member of Focus Financial Partners and previously served as CEO.
1. McKinsey & Company.The looming advisor shortage in US wealth management, February 2025.
2. McKinsey & Company. US wealth management: Amid market turbulence, an industry converges, January 2024.
3. The American Institute of CPAs. 2025 Trends: A Report on Accounting Education, the CPA Exam, and Public Accounting Firms’ Hiring of Recent Graduates, October 2025.
4. Thomson Reuters Institute. 2025 State of Tax Professionals Report, May 2025.
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