What Tax Planning Services Does Your Financial Advisor Offer?


In investment management, there appears to be a disconnect between ‘financial advice’ and ‘tax advice.’ Yet, most sound financial advice includes tax planning. As a client, you should know what tax planning services your firm offers.

What’s more likely, though, is that when you ask your ‘financial advisor’ about your tax situation, you’ll hear,

“I can’t give you advice on that. You’ll have to talk to your tax advisor.”

-Normal brokerage firm rep

You deserve more. You deserve someone working in your best interest.

Why Your Financial Advisor Should Know Tax Planning

At the very least, your financial adviser should have a working knowledge of taxes. Your advisor should also keep up to date on the tax laws and any changes in the tax code. That way, you know that tax efficiency is part of your investment recommendations.

In fact, the CFP® Board requires the following as part of their certification exam:

  • Professional Conduct (8%)
  • Financial Planning Principles (15%)
  • Risk Management & Insurance Planning (11%)
  • Investment Management (17%)
  • Tax Planning (14%)
  • Retirement Planning (18%)
  • Estate Planning (10%)
  • Psychology (7%)

The CFP Board considers tax planning to be as important as mutual funds, discussing financial goals, and retirement plans. If your financial adviser says they can’t give tax-related advice, you should wonder why.

After all, the best way to lower your tax burden is through sound financial planning. And financial planning includes tax planning.

What Tax Planning Services Should Look Like

Now you’re wondering, “What tax planning services does my financial advisor offer?” Here are three things that your advisor should be doing:

1. Incorporating tax planning into your regular meeting schedule.

At least yearly, your advisor should set aside time for tax planning. This gives you the opportunity to discuss tax issues as they come up.

2. Including approximate tax costs (or tax savings) into investment recommendations.

Every investment decision has tax consequences. Besides giving investment advice, your advisor should make you aware of these consequences. The best investment strategy accounts for tax implications like short term or long term capital gains.

3. Offering Information About Tax Strategies That Might Apply to Your Situation

While financial planning services, your advisor learns a lot about your financial situation. This puts them in a great position to answer questions like:

  • Can I do Roth conversions?
  • How much money should I put into my retirement accounts?
  • Should I contribute to a Roth IRA or a traditional IRA?
  • Can I benefit from tax-loss harvesting?

Should my financial advisor work with my tax professional?

Tax planning is one thing. The best financial advisers take it one step further. They team with their clients’ tax professionals, like certified public accountants (CPAs). And you should expect your advisor to do the same.

If you don’t have a CPA, your advisor should know tax professionals to refer you to. When your tax expert and financial professional work together, you’ll have a better experience.

Here are five reasons why your financial advisor should work with your tax professional:

Reason 1: You address issues as a team.

Which conversation would feel better to you?

Conversation 1:

Adviser: You should sell XXX, then buy YYY.

You: What would the estimated taxes be?

Adviser: Well, I’m not a tax expert, so you’ll have to talk to your accountant.

You: Can you tell me what my estimated taxes would be on this investment decision?

Accountant: I’m in the middle of tax season, and busy with tax return preparation. Call me in mid-May.

Adviser: Are you going to follow my recommendations?

You: I have to talk to my tax person first but they’re busy.

Adviser: You missed the opportunity.

Or would you rather have this one?

Conversation 2:

Adviser: You should sell XXX, then buy YYY. This will result in a capital loss that you can use to offset some of your taxable income when you file your tax return. We updated your tax planner based upon this investment recommendation. Here is your total estimated tax bill for the year. Based upon the pay stubs you’ve given us, it appears you’re withholding too much from your paycheck. We recommend that you talk with your HR department about adjusting your W-4. This will help increase your monthly cash flow.

Additionally, we looked at the previous tax returns that your accountant gave to us. With the latest changes in the tax code, we noticed a couple of tax planning opportunities. Making these moves will end up lowering your tax bill in the long run. Would you like to discuss them further?

You: Sure. I like the suggestion about increasing my cash flow, and I’d like to learn more about keeping my taxes low.

Adviser: Great. We’ll schedule a tax planning appointment to go into more detail. Throughout the year, we keep track of any major events in our clients’ financial lives where taxes might be an issue. In January, we forward this information to your accountant. As a courtesy, we also include brokerage statements. This allows your accountant to get started on your tax return without having to wait. It also makes it less likely that you’ll have to file an extension. Is this all right with you?

You: Yes. I know that would make my CPA’s life easier.

This conversation is common for advisers who do tax planning with their clients. Working with the CPA ensures access to expertise in more complicated tax situations. Many times, your financial adviser can do this with your accountant without you in the room.

Reason 2: As the client, you don’t have to be in charge.

When your advisors are on the same side, you don’t have to be in charge. This is especially true if your advisers consist of:

When there are several ways for your team to be accountable for the advice they give, it makes it more compelling for them to get it right. This is only to your benefit.

Reason 3: You get better service during tax season.

As great as your accountant may be, they’re usually not available from February to May.

Why May? After the April 15th deadline, many accountants take a couple weeks off. This helps them recharge after working 80-90 hour weeks during tax season.

While that’s understandable, this doesn’t mean you should lose access to tax advice. And if your financial planner is knowledgeable about taxes, you don’t have to.

A financial adviser can provide first-level tax guidance or education on a topic. And many financial advisers are in fact CPAs or enrolled agents themselves. This means they can give you advice without having to wait.

After all, you shouldn’t have to wait until tax season is over to have access to tax advice. Your team should be able to help you throughout the year.

Reason 4: You avoid unpleasant surprises.

Many clients leave their advisors because of very unpleasant surprises. When I was a financial planner, I saw this often. In fact, several clients came to me because of this.

In each case, the advisor made big trades in their clients’ investment portfolio. These trades created huge, unexpected tax bills.

While this did not cause financial hardship, those tax bills were unnecessary. And everyone wants to avoid unnecessary taxes, regardless of their tax bracket.

This happens to a lot of people in their 70s. They now have to start taking required minimum distributions (RMDs) from their IRAs. Even if they don’t need the money.

And they start taking Social Security as well. This usually causes taxable income to go up. Often, this can even cause a jump to the next tax bracket.

Most financial planners offer the following:

  • A mid-year tax projection outlining their estimated taxes
  • A scheduled meeting to discuss their clients’ tax situation
  • Recommendations on how to lower their tax liability
  • Recommendations on whether they need to make extra payments to avoid penalties

Most of the time, things are on track, especially if you have a long-term relationship. Sometimes, though, your advisor might see something that doesn’t look quite right.

Dedicated tax planning allows you and your advisor to explore this in more depth. And your advisor can re-run the tax projection with updated information. Or they might discuss the situation with the CPA to get another opinion.

In my experience, most clients are okay with paying taxes throughout the year. What most people are NOT all right with is finding a four or five-figure tax bill on April 14th.

Reason 5: You can be more proactive in your tax planning.

A funny thing happens when you don’t have to worry about going back and forth. When you can take a step back and think about the big picture.

You can actually shift the focus of your planning meetings on the big picture. And the big picture is what financial planning is truly about.

For most of our lives, we have a mantra beaten into our heads:

  • Go to school
  • Get a good paying job
  • Spend less money than you earn
  • Save the difference

As long as you’re able to spend less than you earn, then you should be okay. But there is a certain flaw in that thinking.

  • First, it assumes that nothing will ever happen to your ability to continue earning money.
  • Second, it never teaches you what to do when you stop earning money.
  • Third, you never figure out when you can stop working. Many people just take a guess and hope for the best.

Financial planning helps you address these issues. Proper financial planning lets you, the client, ask the ‘what if’ questions. Then your team works with you to create the solution that’s right for you.

When you’re in ‘crisis’ mode, you might very well quit in frustration. This happens when you’re the one trying to coordinate the details. You never you get to the ‘next-level’ questions. And that’s a shame, because money and taxes shouldn’t drive your life.

Sometimes, advisors do have to have tough conversations with their clients. But they shouldn’t be about the routine things that your advisor can handle with your CPA. And the CPAs can get clients’ tax returns done with less effort.

How do I get my ‘investments guy’ and CPA on the same team?

The simple way to start is to ask your financial advisor about their approach to taxes. Ask them if they:

  • Work with your CPA to coordinate your tax returns
  • Do mid-year tax projections or tax planning meetings throughout the year
  • Consult with your CPA on the difficult issues

If their answer is “No,” then find another financial person.

Finding a financial advisor who offers tax planning services

There are plenty of places to find a fiduciary advisor who does tax planning. Here are three places to find an advisor who is willing to work with new clients:

  • Alliance of Comprehensive Planners (ACP): ACP was founded in 1995 by a tax attorney. ACP advisors incorporate tax planning into the financial planning process. Today, ACP has over 150 members throughout the United States. ACP members are Certified Financial Planners, and many of them are tax professionals.
  • National Association of Financial Planning Advisors (NAPFA): NAPFA is the pre-eminent trade organization for fee-only financial planners. However, not all NAPFA members practice tax planning, so you will have to do some due diligence.
  • Personal Capital: As one of the largest fee-only investment advisors, Personal Capital has a wealth of financial planning expertise. Additionally, its size enables access to technology many advisors can’t provide. As result, Personal Capital has tools that will help you track your net worth, manage investments, and keep track of your expenses. Even if you’re not ready to start working with a Personal Capital advisor, you can open a free Personal Capital account here.


Tax planning is a crucial element to the financial planning process. Your financial advisor cannot give the best advice if tax planning isn’t part of their process. As more advisors become tax-savvy, clients can expect their advisors to do tax planning. It’s in your best interest to ask, “What tax planning services does my financial advisor offer?”

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