The 8 Wealth Management Issues and Form 1040 Resolving a Common Frustration for Tax Professionals

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1 The 8 Wealth Management Issues and Form 1040 Resolving a Common Frustration for Tax Professionals Sarah is a tax professional whose clients often ask for financial advice. One morning, her client Mike came in for an appointment. Because Mike had recently changed jobs, Sarah suggested he roll over his 401(k) to an IRA. And because Mike and his wife were saving for a house, Sarah diagrammed a basic savings plan for them. Sarah was glad Mike trusted her for advice and enjoyed sharing what she knew. But she could sense that Mike wanted more information guidance that lay beyond her expertise. And she knew that without the proper licenses, she would never be able to deliver all the financial products Mike and his wife needed. As Mike got up to leave the office, Sarah referred him to a broker who could handle his IRA rollover. But she wondered whether Mike would follow through. And she worried that if he did, he might end up with an inappropriate investment that would lead to future tax issues leaving Sarah with an unhappy client. Does this story sound familiar to you? If you focus solely on tax preparation, you re limiting the amount of assistance you can provide to your clients and you re leaving potential revenue on the table. The irony is that as a tax professional, you re the perfect person to spot your clients financial issues and then help solve them. Let s take a look at some of the specific places where you can identify financial issues on your clients standard 1040 tax forms. We ll then explore how you can use this information to have meaningful discussions with your clients and how you can get the training and licensing you need to meet all of your clients financial needs. Finding Financial Issues on Form 1040 As a tax professional, you re already familiar with Form And as you ve probably noticed specific lines and sections of Form 1040 often reveal that your tax preparation clients need financial advice. Here s where to look for these issues on Form 1040: Line 6: If your client has dependents, then he/she may need to set up a savings plan such as a and for every account you set up, you can earn a fee. Your client may also need to consider purchasing a life insurance policy to make sure his/her dependents will be taken care of, no matter what. 1 Before investing in a state-specific 529 plan, you should compare your own state s qualified tuition program and any state tax or other advantages it may provide.

2 Finding Financial Issues on Form Continued Line 7: Does your client have more than one W-2? If so, there s a good chance he/she changed jobs within the past year. That means he/she may need to roll over his/her qualified retirement plans into investments with more appropriate objectives and diversification options, such as IRAs. This is another opportunity for you to earn a fee just by helping a client pursue his/her financial goals. Line 31a: A client who s reporting alimony payments for the first time has likely been through some difficult life-changing events. Now that his/her shared financial goals have disappeared and his/her spending patterns are likely shifting, it s a good time for you to start a conversation about his/her financial future. Line 32: If your client is eligible for an IRA but isn t reporting an IRA contribution for the current tax year, that s a good opening to discuss his/her long-term goals for retirement. Lines 76 and 77: When clients have to write large checks and pay penalties to the U.S. Treasury, they often bring up cash flow and debt management issues. You ll want to make sure you re prepared to meet their needs. Schedule B: If your client reports more than $400 on his/her Schedule B, then it may be time for him/her to shift his/her portfolio allocation to a more appropriate investment vehicle, such as a mutual fund. Schedule B: Estate planners often fund bypass trusts at the death of the first spouse by using nonretirement assets such as brokerage funds. But this strategy may not work if the bulk of the assets are in the name of one spouse. Schedule C: Clients who report Schedule C income but no retirement plan contributions may benefit by establishing small-business retirement plans such as SEPs, SIMPLEs or Solo 401(k)s. Once you ve spotted these key client issues, you have a perfect opportunity to begin a financial review with your clients. HD Vest Advisors do this every day using a patented methodology we call the 8 Wealth Management Issues. 8 Wealth Management Issues If you re serious about helping your clients meet all their financial challenges, consider becoming an HD Vest Advisor. Once you ve joined our team, you ll be able to guide your clients through the eight most common wealth management issues: 1. Investment Management Are your clients asking you for in-depth investment advice? Educate them by making recommendations about investments, including stocks, bonds, mutual funds, variable insurance, annuities, and trusts.

3 8 Wealth Management Issues... Continued 2. Cash Flow and Debt Management As of March 2013, the average American s credit card debt was $15,266, the average student loan debt was $32,559, and the average mortgage debt was $149,667. Americans need help with cash flow and debt management. As an HD Vest Advisor, you ll be positioned to provide it. 3. Family Risk Management Life insurance is an important planning topic, especially for families with young children. As an HD Vest Advisor, you ll be qualified to counsel clients on the amount of coverage they ll need and if you have an insurance license, you can actually sell them a policy yourself. 4. Retirement Planning The sooner your clients start planning for retirement, the better. As they approach retirement, their investment portfolios may need to change. Give them the customized guidance they need. 5. Education Planning With tuition increases outpacing inflation, education planning has become more important than ever. As an HD Vest Advisor, you can assist clients with 529 plans and education planning. 6. Estate Planning Help your clients preserve their estates for their survivors, as well as legacy inheritance. HD Vest Advisors provide holistic estate planning services that can address any financial situation. 7. Business Planning Some of your clients are probably business owners. How can they fund retirement for themselves, as well as their employees? And how should they prepare to transfer their businesses when they retire? These are typical issues our Advisors are prepared to tackle. 8. Special Situations Planning When life-changing events occur, you can help keep your clients financial goals on track. I believe strongly that the 1040 is the best method of learning about my clients, monitoring their financial situation, and being able to uncover new opportunities. - Marc Wagner, HD Vest Advisor since Federal Reserve. Aggregate Revolving Consumer Debt Survey. March, 2013.

4 Why Become an HD Vest Advisor? When you become an Advisor with HD Vest Financial Services (HD Vest), you can go beyond merely identifying your clients financial challenges you can also help them take action. Depending on the type of business you want to run and the specific licenses you earn, you ll be able to provide your clients with some or all of the financial products and services they need. But what s in it for you? Here are some other reasons to add investment services alongside your existing tax practice: Even out your income stream. When your sole focus is preparing taxes, your income will probably be largely seasonal. Tax season will keep you busy, but the rest of the year won t. By adding financial services, you can level your income stream and stay productive all year. Retain clients. Your clients are looking for one place they can go for most or all of their financial services. So it s reasonable to think that after adding financial services to your practice, you could increase your retention rates and referrals. Opportunity cost. Perhaps you re referring clients to other brokers, agents, or financial planners. By only servicing part of your clients needs, you may be losing clients, missing opportunities to increase your revenue per client, and losing the chance to grow your business more effectively. When you add wealth management and financial services to your business, you can grow your business and offer more solutions to your clients. Here s what you ll need to do. A CPA-to-Financial Advisor Success Story Can tax professionals really make the transition to providing financial services? Just ask Jack Oujo. As a CPA, Jack created financial plans for clients and charged them an hourly fee. Lacking the training and licensing to sell securities, he would then have to refer his clients to a stock broker who would earn all the commissions from each transaction. But then Jack realized that an experienced, knowledgeable tax professional like himself would be the perfect person to not only provide financial advice, but also implement it for clients. That s when Jack decided to become an HD Vest Advisor. Jack is now successfully helping his clients and is HD Vest s top-earning Advisor. If he can do it, so can you!

5 Becoming an Advisor What s the hardest part of becoming an Advisor? Finding clients. However, as a tax professional, you already have a pool of clients who probably look to you for financial advice. So you re one step ahead here. Another potential challenge is to earn the licenses you ll need to operate as an Advisor but here again, you have an advantage. As a tax professional, you re used to studying financial topics and passing exams. And if you re planning to join HD Vest, we ll help you decide which types of licenses make sense for your practice and mentor you as you study for your licensing exams. Once you earn your licenses, we ll assign you a personal consultant from our Wealth Management Support (WMS) team. Our WMS consultants have, or are studying for the CFP certification, and partner with a team of specialists in the eight wealth management areas to help you design solutions. They re all on call to support you and your clients. As an HD Vest Advisor, you ll gain access to comprehensive training programs, including: One-on-one mentoring for new Advisors. You can work one-on-one with another HD Vest Advisor who has already succeeded in adding a financial services practice, remembers what it was like to get started, and enjoys sharing their knowledge and experiences with new Advisors. Mentors can help you set achievable business goals, identify resources, and interact successfully with clients. Coaching Program for Advisors who want to take their practice to the next level. Our Coaching Program provides an easy way to work with highly qualified HD Vest Advisors who are committed to helping others achieve their full potential. Chapter Meetings. After tax season, HD Vest holds CPE-qualified half-day training events in more than 120 cities. These workshops allow you to network, share ideas, and receive training in topics such as current economic events, specific investment services, financial solutions, technical information, and marketing ideas. They also provide a venue to catch up on the latest news and corporate developments. You can network with local investment sponsor representatives, learn about available services, and discover how you can leverage them to build your practice. National Conference. At our annual conference, you can meet with staff, network with experienced Advisors, and take courses to expand your knowledge base. Each three-day convention boasts more than 100 courses and attracts as many as 1,200 Advisors. HD Vest Financial Planning Institute (FPI). Held at the HD Vest corporate headquarters in Irving, Texas, each two-and-a-half-day workshop emphasizes practical and direct applications of the business of being an advisor. During the workshops, you ll learn how to approach your clients about financial services, which hurdles you ll need to overcome to be successful, and how to use the tools available from HD Vest. Through your experience at FPI, you ll become more confident about adding financial services alongside your tax practice.

6 About HD Vest Since its inception in 1983, HD Vest Financial Services supports an independent network of tax and non-tax professionals who provide comprehensive financial planning solutions, including securities, insurance, money management services and banking solutions. Approximately 4,600 independent contractors manage over $30 billion in assets for some 1.8 million individuals, families and small businesses in all 50 states. Since 1983, HD Vest and our Advisors have been helping clients: Retire with financial dignity Provide college educations for their children Manage the risk of catastrophic financial loss Our mission is to be the leading provider of financial solutions through trusted, ethical and highly educated tax professionals who are dedicated to helping American families and small businesses pursue financial security. We accomplish this in partnership with one another, through our business partners, and by offering products and services we believe in and are proud to use and recommend. For more information about HD Vest Financial Services, please visit hdvest.com or contact a Business Development Consultant at (800) Securities offered through HD Vest Investment Services SM, Member SIPC Advisory Services offered through HD Vest Advisory Services SM 6333 N. State Highway 161, Fourth Floor, Irving, TX 75038, (972) /13 Brokerage accounts carried by First Clearing, LLC, Member SIPC and a non-bank affiliate of Wells Fargo & Company.