8 Wealth Management Issues #7 And 8: Business Planning and Special Situations Planning

The 1040 Can Help You Address Your Clients’ Individual Needs.

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In the April issue of Tax Insider E-Newsletter, we introduced the 8 Wealth Management Issues^SM, which we believe will help enhance your role as your client’s tax advisor. Each of the 8 Wealth Management issues - Investment Management, Cash Flow & Debt Management, Family Risk Management, Retirement Planning, Education Planning, Legacy Planning, Business Planning and Special Situations Planning - are interrelated. With these 8 Wealth Management Issues, you can help your clients identify the issues they have already adequately covered and those issues that need more attention. You can help your clients create an action plan that addresses these issues as they see fit. This month’s issue will focus on Business Planning and Special Situations Planning.

In today’s investment environment, it is easy for your clients to be overwhelmed by the amount of information available. It seems that the media and the so-called “experts” are always telling them what to do with their investments, even though they do not have any knowledge of their specific financial situation. Without professional advice, taking action could be detrimental to your clients’ investment goals.

8 Wealth Management Issue #7: Business Planning
As a business owner, your clients are more likely to face daily challenges such as having enough cash available to take advantage of opportunities when they arise, using the business as a vehicle to save for their and possibly their employees’ retirement, and protecting their business from a potentially devastating financial loss. The demands of running a company may leave very little time to focus on the important financial matters that can have a major impact on your clients, their families, their businesses and their futures.

You can help your clients evaluate and implement strategies that not only protect their businesses, but also take advantage of opportunities that could improve the cash flow, tax situation, benefits and bottom line of their businesses.

You can identify opportunities from the 1040 as follows:

Line 12: Business Income
With your Schedule C clients, you may want to discuss the entity structure of their businesses. Depending on the type of business they are engaged in, the asset protection and tax benefits of incorporating may be a better alternative to their current entity structure.

Schedule C clients should also evaluate their risk management plans. This could include disability, overhead insurance and key person insurance to protect the business in the event an owner or key employee became disabled or passed away.

Another great opportunity with Schedule C clients is to discuss their business succession plans. Many business owners spend a large part of their life building a business, but when they wish to retire they have no plans in place to transition out of the business.

8 Wealth Management Issue #8: Special Situations Planning
Throughout your life, as you pursue your long-term goals, some expected and unexpected needs will come your way, whether it is planning for a wedding, taking a spur-of-the moment dream vacation, deciding to buy a second home, or facing unexpected expenses due to unforeseen events.

As your clients’ Advisor, you can help them with situations that do not always fit nicely into the other wealth management issues. You can assist with determining a path to get your clients through whatever financial challenges and opportunities arise. While working with them in these special situations, you can continue to monitor their tax situations as well as their progress in the other wealth management issues.

It is difficult to identify special situation planning needs by simply looking at a particular line on the 1040. Instead you will need to rely on the established relationships you have with your clients. You meet with them at least once a year. They share information willingly with you. In many cases they are your friends. To identify these special situation planning needs, all you have to do is keep your ears open and offer to help them evaluate their options from both the tax and financial perspectives.

Using the Form 1040 to examine financial planning opportunities may be new to some individuals. However, understanding a client’s tax return and the information contained in it is critical to the overall financial planning. The tax return can shed light on financial mysteries and uncover financial obstacles that keep clients from reaching their goals. Most clients want someone to tell them what to do. Taxes and investments are confusing. Your clients will respect you for helping them identify a need and working to solve it.

The current economic and market environment reinforces the importance of using a comprehensive and repeatable process to address the wealth management challenges your tax clients face, not only for their retirement plans, but their entire portfolios. Whether their wealth is valued at $10,000 or $10,000,000, it is critical in times like these that a client has an Advisor who is knowledgeable about their complete financial picture, including their tax situation, so they can be given appropriate advice and recommendations. Our 8 Wealth Management Issues strategy can assist you with you helping your clients.