AssetMark: Overcoming the 3 Main Challenges to Offering Tax Management Services

While the old adage goes that the only things certain in life are death in taxes, new capabilities are now available to financial advisors that help them ease their client’s taxable burdens through tax-efficient investing. Advisors already employ many tax-optimization strategies in non-qualified, taxable accounts, such as tax-loss harvesting. Providing tax management services is a logical addition, yet many advisors hesitate to integrate tax optimization into their portfolio management.

What Are Tax Management Services?

Tax management services are a suite of capabilities, tools and resources designed to improve the tax efficiency of a portfolio and potentially increase an investor’s after-tax returns.

What Tax Optimization Services Do Clients Expect From Their Financial Advisors and Why?

The market volatility of recent years has weighed heavily on investors looking to capture returns and recoup some of their market losses. High-net-worth clients are particularly sensitive to the negative impact taxes can have on their estate planning and generational wealth transfer efforts. Today’s sophisticated client is in search of a financial professional who can provide them with a wide array of wealth management support that goes beyond portfolio management, such as:

  1. Tax-loss harvesting
  2. Tax-efficient withdrawal strategies
  3. Tax-effective asset trading
  4. Tax-managed portfolio rebalancing
  5. Ongoing tax monitoring to optimize returns

Financial advisors who can deliver on these expectations can elevate their practices, increase referability and increase client satisfaction.

3 Main Challenges of Providing Tax Management Services

Here are three common barriers that prevent financial advisors from providing tax management and tax optimization services:

  1. It’s time consuming and labor intensive
    Financial advisors are already juggling multiple responsibilities, from asset management to building client relationships to prospecting. Adding personalized tax management to their workload for a large client base can be overwhelming. And advisors do not want to compromise the quality of their client support.
  2. Ongoing Continuing Education (“CE”) is required
    Maintaining expertise in tax management requires ongoing education to stay abreast of tax law changes. Many financial advisors, already saddled with fulfilling their current continuing education requirements, may find it increasingly difficult to add tax CE as well.
  3. Tax is a difficult topic to discuss with clients
    Discussing tax-related topics with clients can be complex and uncomfortable. Each client's unique situation, financial goals, assets, and even their location can result in detailed discussions. Advisors may feel ill-equipped to address the tax treatment and suitable tax strategies for diverse clients. The fear of regulatory non-compliance and potential liability also adds to the hesitation.

These are legitimate concerns for advisors.

Providing meaningful, personalized tax consultation as well as tax-efficient investing is challenging, even with the help and support of tax software and tools. Unlike standardized model portfolios that can be applied to multiple clients, each individual’s tax situation is unique. Preparing for and engaging in tax-related conversations with each client multiple times a year, alongside other wealth management services, is a formidable logistical challenge.

Also, with tax laws and regulations constantly evolving at the federal and state levels, it is difficult for advisors to maintain their tax expertise while simultaneously providing investment guidance to their clients. This is especially true in areas such as estate tax planning, where IRS rules and legislative changes require ongoing diligence surrounding compliance.

New technologies are emerging that help advisors overcome these legitimate concerns and deliver tax management services to their clients.

These new platforms help advisors deliver tax efficiencies to their clients efficiently, cost-effectively, and at scale. However, not all platforms are created equally. For advisors, it is crucial to use a service that offers daily account monitoring and rebalancing, which may help improve client investing outcomes. Integration with their existing platforms helps advisors incorporate these services into their practice quickly.

AssetMark’s Helps Advisors Expand Their Optimization Services and Meet Client Expectations

AssetMark recently introduced AssetMark Tax Management Services (TMS), an intuitive, easy-to-use platform designed to address the formidable challenges faced by financial advisors and their clients. TMS offers ongoing account monitoring, trading, loss harvesting, rebalancing, and gains deferral designed to reduce current tax liabilities and improve long-term portfolio results. It considers the client's investment preferences (e.g., risk tolerance, tax sensitivity and individual tax rates) and unique circumstances to deliver customized tax management support and help financial advisors deliver tax-efficient investing strategies and tax-efficient withdrawal strategies.

Technology-enabled solutions like AssetMark Tax Management Services offer a scalable and efficient way for financial advisors to overcome the formidable barriers associated with providing tax management services. By automating the process and offering ongoing support, advisors can help their clients receive optimal tax optimization while seamlessly integrating with their existing service platforms.

The team at AssetMark is here to help you incorporate tax management services into your business and support you with any area of your business.

We’d love to chat. Contact our team to schedule a brief consultation and learn more about what we can do for you.


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