Perhaps nothing provides a clearer line of sight into a client's full financial picture -- and, by extension, gives you a better understanding of your clients' needs and how to address them.
Consider these seven ideas to deepen your relationships with your clients by digging deeper into their 1040s, prepared by Chad Smith, a wealth management strategist at HD Vest Investment Services.
1. MISSED IRA OPPORTUNITIES
Still, clients often do not have one -- and sometimes it's the clients you least expect. Don't assume anything: Always make sure your clients have IRAs and, perhaps more importantly, make sure they are making the maximum allowable contributions.
2. WITHDRAWAL PROBLEMS
Based on cash flow projections and long-term goals, you may conclude that they are not taking enough money from their IRA each year. It's also possible that they are taking too much. One of the biggest concerns Americans have is outliving their money, and excessive IRA distributions could deplete their assets too quickly.
3. RETIREMENT PLAN OPPORTUNITIES
Schedule C (Line 12) or Schedule E (Line 17 with an active business) will let you know whether a client is eligible for a small-business retirement plan, like a Simplified Employee Pension (SEP), IRA or other qualified plan option. Such options could not only help business owners better prepare for retirement but also significantly lower their yearly tax bills.
If business owners already have a retirement plan, the deduction is on Line 28 -- and that could be an opportunity for a review.
4. CONSERVATIVE ALLOCATIONS
Given the current low interest-rate environment for deposit instruments -- unlikely to change dramatically in the near future -- Line 8 provides an opening to have a conversation about placing these assets in investment vehicles that may offer greater returns.
5. POTENTIAL FOR TAX ALPHA
By suggesting investments with low turnover rates, suggesting or implementing more aggressive tax-loss harvesting strategies to minimize capital gains, or directing them toward tax-deferred vehicles, you may be able to help clients in the above income brackets achieve greater tax efficiency.
6. COMPETITIVE CHALLENGES
This is not a threat, or mean that you can't offer useful advice. Consider it an opportunity to talk to the client about whether they're getting the service they need.