Moriah Diedrich is a demand generation specialist at NaviPlan, the financial planning technology provider of choice for more than 140,000 financial professionals.
In December of 2020, the Consolidated Appropriations Act (CAA) was signed, containing $900 billion in stimulus relief for the COVID-19 pandemic. The CAA includes refundable tax credits, disaster loans, extensions for the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and various new tax, payroll, and retirement provisions.
While these relief efforts were much needed and incredibly helpful, they add a new level of complexity to the 2021 tax season. Despite the deadline to file being extended by a month, these complexities will likely lead to an increase of investors seeking tax advice from professionals, and a recent LendingTree survey of 1,000 Americans revealed the following:
- More than half (54 percent) are dreading filing their taxes.
- 36 percent plan to employ an accountant or advisor to complete their taxes.
- 4 in 10 are counting on getting a tax refund to cover their expenses.
What can we deduce from this information? We need to simplify the tax filing process, and everyone can benefit from financial planning so they can stop relying on financial windfalls. Let’s discuss what CPAs and other advisors can do to ease the tax planning process for their clients, and their firms, and create opportunities for growth in the area of financial planning.
Simplifying the tax process
Investing in the tools that make tax planning easier and more efficient will greatly benefit CPAs and yield results quickly. When selecting a financial planning tool that can produce detailed tax advice, look for:
1. A detailed tax calculation engine
Detailed tax calculation engines give advisors the ability to create accurate tax forecasts from basic retirement situations up to multi-million-dollar estate scenarios
2. Advanced module offerings
These advanced modules allow advisors to model tax-efficient strategies to meet any client objective, such as equity compensation, business planning, and estate planning.
3. Alternative scenario planning options
To demonstrate the value of advisor advice, scenario planning tools can be used to show side-by-side comparisons of a client’s current financial situation, the advisor’s recommended plan, and any alternative paths that the client may want to consider.
4. Client portal
A good client portal will expedite client onboarding and connect clients with their financial plans, allowing them to better stay on track. Portals have become extremely important in the world of digital client meetings and will continue to generate value for clients and advisors alike.
Growing your business with financial planning
After you have implemented a tool that supports your tax planning process, take time to consider additional opportunities you can address with clients. During tax season, clients become more organized with their finances, presenting the opportunity to bring up holistic financial planning. Advisors can transition from tax planning into a discussion about financial goals and concerns that can be better supported with a financial plan.
Setting yourself up for success
While implementing a new tax and financial planning tool may not be feasible during tax season, it’s a great time to evaluate your current processes to identify weak points. Do your clients need detailed business planning which you cannot offer with your existing tools? Does your software offer basic tax filing support, yet lack the ability to provide tax forecasts? Could you expand tax planning discussions into comprehensive financial planning?
2020 was undoubtedly a year of uncertainty, felt deeply in the financial industry. As we continue to adapt to tax rules brought about by the pandemic and prepare for the increased demand for tax planning, make a conscious effort to refocus on your clients and their financial wellbeing. How can you help clients move from a state of uncertainty (where they may be relying on financial windfalls) to a point of financial stability?