What to Expect from Your Financial Advisor at Tax Time

That time of year is coming up again you guys…yup. It’s tax time. I hear a lot that people aren’t able to get tax advice from their financial advisors…which is odd to me. So the question is—what should you be able to expect from your financial advisor at tax time?

A financial advisor’s whole job is money, so it seems reasonable to expect that they would have a solid handle on…you know…money. Which is just what taxes are.

I also hear that financial advisors are sometimes not overly hands-on with their clients or can be hard to get in touch with.

I’m here to tell you in my latest podcast why you should expect tax advice from your financial advisor AND get great service.

Show Notes:

Hello, and welcome back to another round of, “Our Heart of Money Talks”. This is episode 14 and I’m sharing what to expect from your financial advisor at tax time. Do you remember one of my earliest podcasts? I shared how financial advisors are compensated. I gave the low down on all the different ways you might be paying an advisor.

I really, really hope it is a transparent fee of 1% that you can see every month and that it’s not affiliated with any products. Go back and listen to that episode again if you need to remember the type of compensation that I don’t approve, which is trailing commissions that you don’t see, and it’s tied to certain investment products, paying the advisor.

So let’s assume today, it’s the transparent fee of 1% your advisor earns. By providing you some outstanding client service, and I hope they’re helping you at tax time, they’re going to earn their keep here. If you never hear from your advisor and they are only selling you investment products and you never talk tax or financial big picture planning, then you need to put on your runners and get away.

I want to tell you today that you should be expecting to hear from your financial advisor right now at tax time. I want to share with you all these things, I’m going to give you a checklist to start.

The first thing is they should be preparing your tax package, which is slips and summaries of any taxable gains or losses.

They should be sending you statements that show the total advisor fees you paid and including that in the non-registered tax package, because in that non-registered account, the fees are tax-deductible. You wouldn’t believe how many people I see missing this when they come over to me and they’d never had the transparent 1% advisor fee set up.

They’ve never had the tax-deductible management fees made clear. So you should be meeting or talking to review everything, and that should be part of the conversation.

The next thing that should be in that review is planning out your savings for the rest of the year based on your filed taxes from the previous year and then making that plan for the next year.

If you’re retired, reviewing your income for the remaining of the year and having that tax projection, this is all about looking for tax savings. This is how we earn our keep. We should be doing financial projections for you that show all the scenarios.

What many financial advisors don’t do is tax planning. Conversely, you might get advice from your investment advisor such as, “Oh yes. You should be investing in this because of the following reasons, blah, blah, blah, blah, blah, blah.”

But if you asked how much you’d pay in capital gains by selling a certain investment, you might also hear, “Oh, I don’t know. You’d have to talk with your tax preparer or your tax planner about that.”

There’s something wrong with this. They’re telling you about why you should be invested in this, but they’re not even talking about the tax consequences and you shouldn’t even have to ask about that.

That should just be laid out in advance for you. If they say, “Go talk to your tax planner about that, or go talk to your tax preparer”…. No, no, this is our job. Your financial planners should be able to tell you about each investment and have each decision well thought out, with the tax consequence scenario known in advance.

In fact, we actually plan out until age 96 what this looks like now, projections and I guess you could call them guesstimations, but they’re very much based on educated assumptions also. Your financial advisors should be asking for a copy of your tax return and notice of assessment every year.

Tax planning is one of the biggest benefits of a relationship with your financial planner. You should hear from them, have regular contact and have investments and finances explained easily and made understandable. This is your reminder to assess if your financial advisor is taking care of you right now.

When I was listing those things, you should be like check. Yup. Check. Yup. Yup. I hope you have a great relationship with them. Never feel guilty for demanding good client service. Remember they’re being compensated and they should be the steward of your financial affairs.

I hope they are involved and care about you not leaving you feeling like another number. You should never feel like you’re bothering them when you call and ask for these things. Next week, I’ll share with you how to give your financial advisor the pink slip. That should be fun. Consider that episode if your advisor didn’t make the cut today.

That’s it. We’ll talk more next week.