Are advisors falling short on tax planning strategies?

A new survey from the American College of Financial Services reveals notable gaps between the services financial advisors offer and what clients are requesting, particularly when it comes to tax-based planning.

The 2024 Advisory Services Survey polled dually registered advisors, investment advisor representatives, and insurance agents or registered representatives, underscoring both opportunities and challenges in service delivery across the industry.

According to the survey, both dually registered advisors and IARs in the independent space are leading the way in offering a comprehensive range of services including retirement planning (more than 95 percent for both groups), risk management (86.1 percent of duals and 76.5 percent of IARs), and estate planning (more than three-quarters for both groups).

However, the numbers drop off when it comes to business planning, where only 57 percent of dually registered advisors and 44 percent of investment advisor representatives said they have a particular focus.

The report underscored tax-aware planning strategies as a point of differentiation, particularly for independent advisors. “Financial professionals who are dually registered or investment advisor representatives have a competitive advantage in delivering tax-informed planning strategies to differentiate their practices,” it noted.

While insurance agents and registered reps' tax planning services are often limited by compliance requirements from their home office, American College found more than half of them still employ tax-efficient withdrawal strategies (54 percent) and conducts tax planning around life events (51 percent). 

Turning to the most-requested services by clients, the survey highlighted a significant unmet demand for tax planning centered on small business owners. Among respondents, 68 percent of insurance agents and registered representatives, 54 percent of investment advisor representatives, and 57 percent of dually registered advisors said they don't use the service, but it's "always" or "often" requested by clients.

"[A]cross all categories, advisors are not meeting the needs of their clients when it comes to small business tax planning, a valuable service that many advisors could benefit from offering to their clients," the report said.