Page 21 - Investment Advisor May 2021

know what you don’t know,” explained it’ll send up a flare saying, ‘Hey, this is sure we keep pushing the message of long-
Levine, a CPA and CFP. “Unfortunately, identical to another payment you just term investing,” said Courtney Ranstrom,
this [situation raised by Wruk] is a case made. So, the question is how much CFP, co-founder of Trailhead Planners.
of what you don’t know biting you in should the [investing] platform get into While this approach isn’t exciting
the butt after it’s too late. After the year putting guardrails around investors?” as the day-trading scene, “It’s our jobs
ends, it’s too late to go back and fix these Benz asked. to be relatively boring, and we should
sorts of things.” Morningstar’s research has found be making [investing] boring for our
Levine agrees that the “gamification” that most investors “don’t do a great job clients in a way that’s very good for
of investing is a factor in these situa- from the standpoint of trading,” she said. them,” explained Ranstrom. “This way,
tions. Taxes are “probably the last thing “They don’t capture a fund’s full return, they can focus on and realize their
anybody’s thinking about. They’re just for instance. So, less trading is more goals — around their children, their
having fun … ,” he added. when it comes to successful investing.” careers and retirement.”
When asked about the DIY investor situations like
DIY investor’s trading, a TD The platforms “gamify the one raised by Wruk give
Ameritrade spokesperson said: advisors the chance “to warn
“We offer a number of edu- [investing] to where people people that trading is not a
cational resources specific to think it’s just fun …,” strategy,” says Dawn Santoriello,
wash sale rules, including in- CFP, president of DS Financial
platform videos and explainers Herron said. “One of the Strategies. “It’s best to work
and publicly available articles with an advisor, since more
on our Ticker Tape blog.” scary things [DIY investors [investors] get burnt than get
In addition, “to help our lucky” when going it alone.
clients keep track of their TD are] now finding out is The case of the 20-year-
Ameritrade transactions, … they old Robinhood investor who
can see their realized gains and that, hey, 1099-Bs are real.” died by suicide nearly a year
losses on their cost basis page,” ago after an apparent negative
she explained. “Understanding this can The trouble goes beyond the wash- balance of $730,000 in his account, in
be a complex issue, we invite clients sale rule, Benz states: “Some basic which he traded options and other prod-
with any questions to check out our tax knowledge of how accounting works ucts, “shows this is a huge problem,”
resources page or contact a tax services and how income, short- and long-term says Santoriello, as is the possibility of
representative by calling us … during capital gains work should be front and having an $800,000 tax bill. “Most folks
standard business hours.” center on trading platforms,” she said. don’t know about the wash rule, and we
“I’d also like to see it be a little clearer want to inform people about it.”
MORE TAX INFO, OPTIONS NEEDED when it comes to how firms are track- To Herron, the big 1099-B forms and
Typically, investors run into tax issues if ing cost basis. Sometimes this is buried DIY investors’ lack of understanding
and when they get a 1099-B form. That’s in disclosures.” about tax rules “is so frustrating.” While
when they “see the adjustment column Also important is the fact that “if he appreciates the upside of technology
and all of a sudden [they’ve] got a whole you’re in a taxable account, every time overall, the advisor remains deeply con-
bunch of wash-sale losses that are disal- you do the trade, you have a taxable cerned about DIY investors’ ability to
lowed,” Levine explained. event,” said James Angel, an associate get up and trading on apps “in like two
For Christine Benz, director of per- professor at Georgetown’s McDonough minutes,” he says.
sonal finance for Morningstar, the cases School of Business. “The trading is free, “There’s something to be said for
being raised by advisors on social media but at the end of the year, you’ve got an having more financial education in this
are leading to “an open and healthy awful lot of taxable events, gains and country where we hit people at an early
debate about how much platforms losses, and that can get real complicated, age and showed them the pros and cons
should interject themselves into [inves- real fast.” [of different investing approaches],” the
tor] decisions like this.” INVESTOR EDUCATION advisor explained.
Adobe Stock through a banking platform and “mis- These issues give advisors more impetus Janet Levaux is editor-in-chief of Investment
When you pay your bills online
to “educate the public and really make
takenly pay it again a week later, …
Advisor. She can be reached at [email protected].

MAY 2021 INVESTMENT ADVISOR 19