As you work through another season of tax preparation, what could you do this year to make the experience more valuable to your clients than just telling them how much they owe or how much they’re getting back?

Many accountants are thinking that they can find deductions, get the return done faster, charge less. I don’t want to be the bearer of bad news, but if you were going down this track you don’t get it. These are hardly elements of value; they are the bare-bones table stakes and one of the main reasons why people ask a CPA to do their personal returns.

Value delivered to personal tax clients has to go beyond debits and credits, and more toward how can you help the numbers on their tax return and their financial life be in general a bit better. You know that I’m pointing in the direction of financial planning, but this article isn’t about what you can do to make your PFP department better. At this time of year, you either have a PFP department or you don’t. This is about how you can help to make your clients’ financial lives a bit better, whether you do financial planning or not.

At the core of this higher-level service is issue recognition. Some CPAs pay attention to the issues hidden in plain sight at the front lines of tax preparation and others simply try to get the returns done on budget so they can have a more profitable tax season. This decision is yours, but I’ve developed some interesting observations over the years about the two styles of service.

My observations of the tax factory, where owners want to do the least that they can do to maximize profits, isn’t pretty. These are typically the firms that hurry through tax season every year because they judge their success by volume, not by how satisfied their clientele feels. How many returns did they crank out? How much did they bill? What was their net realization from tax preparation services? As a result of thinking like this, these firms are afraid to ask any open-ended or probing questions because it takes time.

Shops like these will struggle forever. Now let me define “struggle,” because you can make a good paycheck from running a tax factory. I define “struggle” as a stressful tax season where you work relentless hours to the detriment of every other part of your life. These firms also struggle because of a lack of talent. They simply cannot find or retain good talent. The reason is simple: Smart people don’t want to have a life that they don’t like or a job that takes them away from life for a third (or more) of the year. To me, that is struggling.


THE OTHER APPROACH

The other style of service is more like a concierge tax shop, where client service and elevating the experience are the firm’s primary concerns. These firms return calls promptly, and they think of their clients more as people, rather than an account number. They are willing to meet with their clients instead of doing everything by mail. These firms have proactive ideas to help their clients prosper. They ask questions in their meetings that are more than what is needed to simply get the tax return job done. These firms are not afraid of investing an additional 15 minutes with a client in the hopes that they can make their time together more valuable.

Continue reading if you want to be a greater resource to your clients during tax season and elevate their experience. As previously stated, issue recognition is where this service experience begins. Getting beyond issue recognition, and deeper into the resolution of the open or incorrect issue, is the ultimate goal for your clients. Your firm can provide the fixes itself, or simply recognize the need for a fix but then make sure that it happened.

When it comes to issue recognition, it isn’t rocket science. But to me, it seems as if many CPAs want to make it seem like rocket science simply to look smart to their clients. It’s one thing to bark out orders to clients that may help their financial world. But if you have barked the same orders for years, and seen no improvement, that should signal that the barking method alone is not enough.

For example, instead of telling your clients that they need to do an estate plan, perhaps you should ask them if you can call an attorney colleague while they are sitting in front of you and watch them schedule an appointment. Of course, that doesn’t mean that the appointment will happen or that the estate plan gets updated, but it is a little more proactive than barking.

On all issues that you recognize, know ahead of the conversation whether your firm can be the solution or whether you plan to introduce someone who can help to solve the problem.


ISSUES TO LOOK FOR

The issue recognition conversations do not have to go too deep. For example, ask your clients with dependent children if they have a plan to pay for higher education. Some will say no and others will have a clearly spelled-out plan. For those with plans, ask what they are. If they use a 529, ask if they make their own investment decisions or if they’ve got guidance. For those without a plan, ask if this is something that they’d like to start doing.

Proceeding down the 1040, instead of simply transcribing the numbers from their W-2, observe and notice if they are maxing out their retirement contributions. If not, ask why. If yes, ask how frequently they change their investments or look at the investments that they’ve chosen over the years. Also ask if they coordinate these investments with any other investment portfolios that they may have. This may also be a good time to talk about the difference between a Roth 401(k) and a traditional 401(k).

When transcribing the information from 1099s, take a look at the addressee of the 1099. If it is sent to Mr. and Mrs., you can presume that this account is held jointly. Whenever I see a bank or investment account held in joint name, it signals that there may not be an estate plan or that if there is an estate plan, it may not be fully implemented. Many well-planned estates utilize a living trust type of plan where assets are held in trust for a host of reasons. Seeing a 1099 in joint name means that there is no such trust or that the planners involved never took the time to change the title to the account to benefit from the trust form of ownership. Perhaps the most common mistake that I see with new clients is the lack of details regarding account ownership from their old advisor.

This would be a good time to ask about your clients’ beneficiary elections. For many clients, besides their home, the retirement plan is often their largest asset. Don’t be stunned by the responses you’ll get from this question.

The most common answer that you’ll get is, “I don’t remember.” That may be OK in that it’s probably been a while since they chose that beneficiary. But it’s not OK if they’ve made a poor choice. The second-most common answer is going to be the spouse, followed by the children in equal parts. While this may work, there could also be a better solution if there are any health, marital or spendthrift issues with the children. If they are minor children, naming them could be too risky in that you don’t really know what they’ll be like at age 21. Again, in this situation, know how you can help by giving them the specific hand-holding that they need or the introduction to an attorney who can get your client’s estate on track.


NEW QUESTIONS

Another way to elevate your clients’ experience during tax season may be to ask new and different questions on your tax organizer. If you don’t use tax organizers, incorporate these questions into your interview language, the cover letter that accompanies your engagement letter, or include them in any newsletter you may send.

These questions should be the types of questions that you can’t answer through the gathering of information to prepare a tax return. Some of my favorite questions include:

  • Do you have a will? How old is it?
  • Do you have trusts?
  • Do you have a health care power of attorney form that is less than five years old?
  • Do you have durable powers of attorney that are less than five years old?
  • Do you own life insurance? If yes, how much and who is the owner and beneficiary?
  • Do you have a current plan for what happens to your business if you don’t wake up for breakfast tomorrow?
  • How much is in your 401(k)? How do you manage that money?

I could sit here and come up with a hundred more questions that will cause your clients to look at you differently. Some will quizzically look at you and wonder why you need to know this information. For them, the answer is simple: “Over the years as your tax preparer, we have come to learn a lot about you and your family. This year, we are trying to close any gaps that you may have in your financial plans.”

When it comes to the better clients of the firm, there aren’t likely to be many quizzical looks. Whether you knew it or not, your best clients already want you more involved in their financial life. Don’t let them down.

John P. Napolitano

John P. Napolitano

John Napolitano, CFP, CPA, is chairman and CEO of U.S. Wealth Management in Braintree, Mass. Reach him through JohnPNapolitano on LinkedIn or (781) 849-9200.