LifeYield offers ‘Taxficient’ info for tax planning

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LifeYield, a provider of cloud-based tax and financial planning services, recently made its proprietary Taxficient Score available to independent advisors, and hired advisor technology veteran Steven Zuschin to build its operations.

Previously, LifeYield’s cloud-based technology was only available to large financial services firms such as Morgan Stanley and Franklin Templeton, but it’s now available to financial advisors, accountants and tax practitioners as well.

“LifeYield is a SaaS technology company that focuses on tax optimization solutions to help clients and advisors keep more of the money that they’re getting investing in the market,” said Zuschin, who is growing the company’s direct-to-advisor channel. “We focus with this new product on the direct-to-advisor channel on communicating the benefits of asset location. We’ve done that by creating the Taxficient Score, which is similar to a FICO score or credit score. You can take any portfolio of accounts, ranging across the spectrum of different types of products and investment strategies, to get an overall score of zero to 100 of how efficiently those assets are managed as it relates to taxes. The higher the score, the more money clients get to keep when they go to liquidate those investments and turn them back into spending money.”

He believes the technology can help accountants provide tax planning advice to clients. “An accountant or a CPA can use it to get the pulse on a client’s situation and see how much coordination needs to happen between their tax professional and their wealth manager or their financial planner,” said Zuschin. “If an accountant or a CPA were to run a review and uncover that a client has a low Taxficient Score, maybe under 50, that’s a call to action not only to review the investments, but also to start coordinating the team around that client so everybody is working together to ensure that client gets the best possible outcome.”

To use the technology, a tax professional can look at the client’s effective tax rate for income along with the long-term capital gains rate. “We want to look at all of the investable assets that they have and the registration type of accounts that those investments are made in,” said Zuschin. “While we’re going to focus on the asset allocation, we want to make sure the investments that they have are taking advantage of the tax code. You might have brokerage accounts or taxable accounts, or tax-deferred or qualified accounts, and then maybe even some Roths. We want to make sure that we’re taking full advantage of the benefits of either a tax-free, tax-deferred or taxable account, and have the correct investment in those accounts. We do all that while maintaining or hitting the target risk allocations for the client’s household.”

He hopes to avoid some of the issues involved with handling multiple financial accounts.

“One of the problems that we see in the industry as it relates to multiple accounts and trying to coordinate them is the client will go through a risk tolerance questionnaire in trying to establish what asset allocation they should have,” said Zuschin. “At best they’ll apply that asset allocation across all of the accounts that they own. It will say they should be a 50/50 investor. Well, if they apply a 50/50 asset allocation across all of their accounts, they’re not particularly coordinating or taking advantage of the benefits of some of the tax deferral or tax-free accounts that they have. It might be more advantageous to have their equities and their high-returning products in a tax-deferred account, and then use something like muni bonds in their taxable account. That’s a real simple example, but one account will look really conservative and another really aggressive, but it can net out at a 50/50 allocation for the household.”

The new tax law will drive more opportunities for clients to consult with tax professionals.

“The new tax law is going to impact how many taxes they’re going to pay when they go to take money out of their retirement accounts,” said Zuschin. “On a long-term basis, what we’re going to do is talk about the value of planning and coordinating long before you need to liquidate the assets. One thing that’s not consistent is the tax law. The best we can do is to coordinate, plan, and take advantage of the rules that are in place today.”

So far, LifeYield isn’t working with any accounting firms, though Zuschin is encouraging accountants to try out the technology individually. “We’re available to thousands of advisors through different strategic partnerships, through different broker-dealers and networks, but anybody can come to LifeYield and access the free version of our software by subscribing without having to pay, which allows them to get an introduction to the Taxficient Score and use our Taxficient calculator,” he said. “Individual professionals can come in, whether they’re accountants or financial professionals. They can license the software and use it directly with their clients, and not have to wait on a large firm to roll out an enterprise version of it.”

Pricing is typically $1,000 per year, or $100 per month.

An elective feature lets professionals turn on a Social Security maximization tool to provide a timely discussion around tax season for clients. “You can review when the most advantageous time to collect Social Security would be, how that would impact the rest of the investments, and what the best path is for the plan an accountant can put together with that client,” said Zuschin.

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Tax planning Retirement planning Social Security