A high-tax environment can be a win-win for clients with a
Roth IRA and for financial advisers who would like to expand their businesses, according to financial guru Edward A. Slott.
“People are looking for true advisers: Do they have retirement distribution planning advice? Can they do tax planning?” he said.
“People make up more in good tax planning than they lose in the market, but the opposite is also true: You can lose everything because of poor tax planning,” Mr. Slott said. “If your client loses that money, so do you.”
Mr. Slott, a certified public accountant at E. Slott & Co. LLP of Rockville Centre, N.Y., spoke this morning at
InvestmentNews’ third annual Retirement Income Summit in New York. His presentation was titled, “Tap the IRA Rollover Bubble Now: Three Essential Actions Advisers Can Take to Capture IRA Assets in Turbulent Times.”
Mr. Slott gave three rules for advisers to live by: “Get educated, get visible and get remembered.”
Higher federal and state taxes are coming, but investment values are depressed and a bonus awaits in the Roth IRA for the tax-savvy adviser, he said.
Similarly, though a conversion to a Roth IRA from a regular individual retirement account will ring up taxes, clients need to understand that putting off those taxes by waiting to convert will, in fact, worsen the blow later.
“If you don’t pay the tax now, it doesn’t mean the problem goes away. It only comes back later, at a higher rate on a higher balance,” Mr. Slott said.
The fluctuating state of estate tax rules presents advisers with another opportunity.
For instance, the estate exemption is $3.5 million this year, up from $2 million last year, but the values of estates have fallen. Clients with IRAs can stretch them or pass them to their grandchildren free of estate tax, Mr. Slott said.
In the event that an estate is depleted, life insurance can help make up the difference and provides another benefit, as money inside the life insurance will grow tax free outside the estate.
Mr. Slott also pointed out that advisers can save themselves costly errors by reviewing wills, trusts and beneficiary forms every time there is a life event, such as a birth, death or divorce.
Advisers should also step up their visibility among their competitors.
“Now is the time to get out there: 90% of your competitors are hiding under their desks,” Mr. Slott said. “If you have any marketing dollars at all, now is the time.”
Disenchanted clients have parted ways with advisers who haven’t met their standards, and they are searching for advisers that they
trust, Mr. Slott said.
Finally, advisers need to make a lasting impression on both their prospects and their clients. In-depth tax and
estate planning — and other services that make an adviser unique — will get clients engaged, Mr. Slott said.
“That can only be done if you’re educated, visible and have something to say other than, ‘buy these stocks and bonds,’” he said.
