How One Small Firm Uses Tech to Tackle Tax Planning

How MFC Integrates Tax Planning Tech

Hargrave describes himself and his colleagues as tax nerds, but he says that is not a prerequisite for a financial planning firm that wants to bring tax issues into its client service process.

"Personally, I love studying tax issues, and I read the IRS codes carefully and with interest, but that's not something everyone shares," Hargrave says. "Fortunately, there is a lot of support out there that advisors and firms can lean on, and that's what we do as well, especially in the way we use eMoney Advisor."

As Hargrave explains, the financial planners at MFC lean on the eMoney platform to analyze and study the potential impact of both federal and state-level taxes. The solution allows for detailed scenario planning, he explains, which helps the firm understand all the ways different investment strategies and outcomes could be affected by current tax laws and potential future changes in tax levels.

Hargrave says the platform helps MFC's planners consider taxes on both the accumulation and spending sides of the financial plan.

"For example, we can work through the platform to show our clients the impact that can be achieved through even modest changes in terms of asset location," he says. "The solution helps us to be highly efficient in terms of the use of Roth-style accounts and health savings accounts, as well. Our clients really appreciate seeing the different projections and the outcomes modeled by the system."

Hargrave says the estate planning features in eMoney are critical to his firm's process, as are its capabilities around required minimum distribution planning and Roth conversions. As Hargrave points out, effective planning in these areas can save clients significant money in a given tax year while also boosting long-term outcomes.

"I believe our process shows how good tax planning really helps any given client, but especially those who have that higher net worth," he says. "Clients who are business owners, as well, really benefit from this type of support."

The Personal Touch

Hargrave says effective tax planning requires more than just powerful technology.

"One thing we have to really press hard on is to make sure our clients are uploading and sharing their tax documents so that we can take advantage of the tech," he points out. "We have to be able to see if they are doing any special deductions, and with the tax documents, we can see more clearly what they might be saving and investing outside of our firm. Getting that overall insight via the tax returns helps us so much."

In Hargrave's experience, it often takes a year or two to get a new client fully integrated into the planning process. There is just so much to do at the beginning of a new advisory relationship that, at least in clients' eyes, the uploading of tax documents might take a back seat.

"To combat this, we make discussions of tax planning a part of our quarterly meetings from the very beginning of the relationship, and we constantly remind our clients that we can do a lot with the tax information they share with us," Hargrave explains.

After several years working under this approach, Hargrave says, the firm is getting very good at inspiring clients to link their tax information, as well as their bank accounts and retirement accounts.

The holistic view, Hargraves says, is critical for an optimal planning process, as is collaboration with a client's accountant, estate attorney and any other planning professionals they work with.