Taking Women By The Hand During Tax Season

It's that time of the year again, when advisors reach out to clients and help work through their tax planning. And while it's a rare client who takes pleasure in talking tax, one leading female advisor says it pays to have the conversation year-round.

"We proactively speak to clients about taxes throughout the year, so we actually don't have a mad rush during this time of the year," says Indya Yullil, partner and managing director at Beacon Pointe. With $37 billion in assets, the California-headquartered firm has claimed leadership as the country's most prominent female-led RIA.

When it comes to tax planning, Yullil says women share the same fundamental concern as all clients do, which is minimizing the impact of tax on their finances. Depending on their life stage, she says conversations with female clients can run the gamut from tax-loss harvesting to retirement income planning and charitable planning.

"It all comes down to education, and making sure they understand their returns and their tax situation," she says.

In a recent survey, Edelman Financial Engines found men had a slightly higher interest than women in tax-deferred savings opportunities from 401(k)s, IRAs, and other tax-advantaged vehicles (42 percent of men versus 35 percent of women). But the balance shifts in the high-net-worth space, where 41 percent of men and 40 percent of women shared the same focus.

"The low-hanging fruit, in many cases, is talking to women about how to save," Yullil says, highlighting the importance of maximizing retirement plan contributions. Aside from their 401(k)s, she says clients need to be educated on potential opportunities to use spousal IRAs and Roth conversions.

When it comes to married women who are working, she also often scores quick wins by finding opportunities to put tax-free money in dependent care flexible spending acounts or healthcare spending accounts. 

Software plays a crucial role as well. Apart from financial planning software, she says her firm has a program where advisors can feed tax returns – which can run into the hundreds of pages – and get back a two-page summary of their tax situation.

"[That's versus] a 1040, which can be difficult for even me to understand in many cases where deductions [and] cap gains are coming from, if there are business entitites, and so on," Yullil says, emphasizing the need to create a safe environment to help women clients get involved in the conversation. "From taking that approach, they tend to feel empowered and start asking questions."

To help boost clients' confidence further, she says the firm models out cash flows under various assumptions of life expectancy for both spouses – a crucial exercise for women, who are statistically more likely to outlive men – as well as assumptions of expenses. For families that often experience health care events, modeling the financial impact of health risks is also helpful.

On the other side, Yullil says advisors at her firm can also model out different ways to produce income from both taxable and retirement account investments, ideally projecting a relatively flat tax profile over time versus the client having to deal with a large tax burden later in life from required minimum distributions, for example.

"This is where planning and really understanding your client is critical, because they may have charitable aspirations," she says. "If they have the means, [and we see they have] ballooning distributions during RMD age, they can gift up to $100,000 of that directly to charity."

In her view, too many advisors offer tax planning services to their clients without emphasizing it as a differentiator. Labeling those conversations explicitly as tax planning meetings, she argues, signals to clients that they're getting value-added work compared to what many other firms provide.

"When they are out and about, speaking with their family and friends who may not be receiving that type of information or service from their current wealth advisor, that would be an easy way for them to refer you," she says. 

Tax planning also gives advisors a chance to coordinate with their clients' CPAs, which Yullil says can open other doors. As they work to ensure all the documents are filled out and endorsed promptly during tax time, advisors can show themselves as valuable partners to CPAs by being easy to work with and having a basic knowledge of their specialty.

"You have to have a basic skill set ... learn about the tax code, and basic tax planning techniques," she says. "With today's technology, you can literally type a question into ChatGPT, and it will give you information about tax planning for a retired client, or the current tax code brackets."

By establishing a harmonious working relationship with CPAs and other professionals in complementary fields, she says advisors can create a powerful growth engine to help grow their client base.

"It's a very easy back-and-forth sharing of clients that will benefit both of you," she says. "You're both organically incentivized to increase that shared pool of clients."