Editor’s note: Don’t forget to sign up for Debbie’s upcoming Tax School for Advisors workshop on January 23–25 and her upcoming Build a Better Business four-day workshop on February 6, 13, 20 and 27.
Now that we are able to close the books on 2023, January is a great time to review major processes and to create a plan for the New Year. No question that 2023 was a year filled with challenges and triumphs for all of us, advisors and clients alike. So, make sure you take the time to review what has worked, what didn’t work, and to set yourself up for an amazing year ahead.
I offer three planning ideas to start 2024 on the right foot.
1. Put into place your financial-planning calendar for the year and consider a client engagement builder for individual clients
Traditionally, advisors meet with each client at least once a year and perform a comprehensive review of their financial plan (reviewing all planning areas such as insurance, estate planning, cash-flow planning, debt management, retirement planning, etc.). However, this process can be very inefficient for the advisor and support staff as it can be time-consuming to perform a detailed review of all of these areas at one time and it can also be difficult to keep the client engaged during such a lengthy meeting.
To combat this inefficiency, you should establish a seasonal planning calendar that addresses the variety of services you deliver throughout the year. We call our planning calendar the “Annual Service Calendar.”
This will provide more structure to your firm’s processes and will create a better experience for each client. In addition, the calendar helps to show the value of ongoing financial planning services to prospects and clients more effectively. See below a sample Annual Service Calendar.
FpPathfinder also created a client service calendar template that you may use in place of creating your own. Their client service calendar provides access to 15 timely guides and client-facing emails that support the services included in the calendar.
In addition, FpPathfinder allows you to create your own client-engagement builder, which includes the topic and the action steps connected with each quarter. The client-engagement builder essentially acts as a personal calendar for your client, and could be a great tool to close prospects or to provide to clients early in the year.
As part of the client engagement builder, FpPathfinder also provides client-facing email templates that will help you get the ball rolling on the service items in the calendar. The calendar covers such items as starting the year off on the right foot, tax returns, reviews and estate document reviews. And, as mentioned above, these items are accompanied by flow charts that FpPathfinder is known for.
PRO TIP: Have you created your client service calendar? If you have, how are you communicating those services to your clients?
2. Put into place your ‘investment thesis,’ consider any rebalancing, and continue to review for tax loss (or tax gain) trading opportunities
The market environment and economic conditions are constantly changing. With interest rates stabilizing and then likely decreasing in the second half of the year, 2024 is likely to look very different than 2023. This means that it is important now to be reviewing your “investment thesis” on a regular basis. We review our capital market assumptions monthly and we are also creating a monthly video in 2024 for clients regarding different investment themes and the market.
The market and the current economic condition (interest rates, inflation prints) will guide your investment thesis. Should you be moving money out of short-duration into intermediate-term bonds while rates are still high? Should you review cash holdings so you are prepared to offer alternatives? Should you consider expanding beyond technology stocks to blend or value stocks or even international ones?
Due to volatility and variance in returns among a variety of investments, we reviewed tax-loss trading opportunities at least once a week in 2023. We anticipate 2024 will bring as much if not more volatility, and therefore we plan to continue with weekly tax-loss trading reviews.
Another thing to consider is when to rebalance accounts for clients that bring in new money—or new clients. A best practice while dealing with markets this volatile is to dollar-cost average over a period that feels most comfortable to your client, taking into consideration their time horizon and the amount of cash being put to work. While in the dollar-cost averaging phase, it is important to ensure cash is at least invested in a money market, as these vehicles are currently yielding over 5.2%.
PRO TIP: Have you reviewed your capital market assumptions? Are you reviewing portfolios to confirm that they are aligned with your market and economic forecasts?
3. Prepare your tax outreach strategy to clients, and consider how you will respond to tax information requests
Every January, we send our top clients “Tax Preparation Letters” that summarize transactions from the prior tax year. This includes, but is not limited to, Roth conversions, IRA contributions, and taxable gains and losses. We use Holistiplan to assist us with the composition of these letters. See below for an example of what the letter looks like.
*Note the above figure is an excerpt of the Holistiplan Tax Preparation Letter
Extensive review goes into each letter considering the peculiarities of each client. We highly recommend that you forward the letter to the tax preparer for each client to ensure a smooth tax preparation season. Proper communication in this area will save you, the tax preparer, and most importantly, your client, tons of headaches.
Once the tax return is filed, it is very important to request the tax return from your clients so that you can conduct tax analysis, distribution analysis and/or Roth conversion analysis. Everything begins with the tax return, making it one of the most important documents you can obtain from your client. We reach out to our clients requesting the tax return in our weekly newsletter, and do targeted outreach to each individual client at least once per month after April.
PRO TIP: Are you prepared to send out the tax preparation letters to clients or to their tax preparers? Have you created a strategy to obtain your clients’ tax returns?
After reading this you should have a better understanding of the three planning concepts discussed in this article.
Start 2024 on the right foot.