It’s hard to believe, but 2016 is rapidly coming to a close. With the chaos that year-end brings, the last thing anyone wants to worry about is their finances. Consequently, this time of year can be a good opportunity for financial advisors to come through for their clients by proactively offering solutions to some common pecuniary conundrums. The following are some discussions financial advisors may want to consider having with their clients.
Now might be an ideal time to bring up the idea of account consolidation with your clients. The average client likely has too many accounts with too many institutions, between retirement plans at different jobs held over the years, investments accounts, and checking and savings accounts. With the imminent changes expected to come through the Department of Labor (DOL), clients could be positioned to start getting phone calls from three or four different institutions, all of whom will want to set up appointments to talk through the potential changes. The problem with that scenario is that it might take up a good deal of time, but it also could create greater confusion as several different people share their perspectives on the changes. A client who has their accounts consolidated within one firm, on the other hand, may be able to enjoy a more streamlined, efficient process when the DOL changes—or any other economic developments—take place.
In 2017, we have a new president taking office, which could mean the onslaught of changes that might impact finances and taxes. If you have clients who are particularly concerned about how taxes might be adjusted, talk to them about the possibility of converting some assets to a Roth IRA. Roth IRAs differ from the traditional IRA in that contributions are made with after-tax dollars, and withdrawals are not taxed. As you have a discussion about this possible strategy, make sure that you address how much the client can afford to convert, as well as how many different IRAs they might already have. With this exchange of information, you can work together with the client to develop the right approach for their situation and level of comfort.
‘Tis the season to be giving. Not only is making a charitable contribution something we should all be doing more regularly, but it also can have some benefits for the giver, as we know. Donations can result in a tax deduction, so it’s good practice to remind clients who are interested in giving to do so before year’s end. Another option for clients who have an IRA and are older than 70.5 is to consider donating their required minimum distribution (RMD)*. If your client doesn’t want or need their annual RMD but hasn’t taken it yet, let them know that they can donate their RMD directly to charity (up to $100,000). If they’ve completed their desired amount of giving and have already accounted for their RMD, then remind them to prepare for tax season by tabulating the year’s charitable contributions. It’s all about timing and preparedness.
There’s a lot to keep track of during this time of year, so use the three Cs to help make life just a little easier for your clients.
*Subject to the unknown of the Trump Presidency
All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable.
The preceding is not intended to be a recommendation or advice. This material is intended for general use by financial advisors.