BFS Advisory Group’s Debra Brennan Tagg Breaks Down How FAs Can Best Engage with Tax Advisors to Operate Successfully
Over the years, Dallas, Texas-based independent wealth management firm BFS Advisory Group has proven itself to be no stranger to tax smart financial planning and wealth management. The firm’s team of six professionals has developed a core strength in supporting Gen X families and business owners across the country.
According to the firm’s president and 22-year wealth management veteran, Debra Brennan Tagg, BFS Advisory, which has $310 million in client assets, has been especially successful when it comes to appealing to people who want to be prudent with their finances, but who don’t want to take a DIY (“do it yourself”) approach.
Additionally, BFS Advisory has developed a unique strength in supporting Gen X families and business owners – Unlike retirees and pre-retirees, these are clients who typically have years to go before they exit the workforce, and as such, delivering the right mix of tax efficient savings and investments can be crucial to their future financial well-being.
As such, BFS Advisory has already been running a tax smart financial advisory business for some years already, current headlines and industry attention on the rising importance of taxes for the wealth management firms notwithstanding.
WSR connected recently with Brennan Tagg to discuss how the firm has been able to successfully grow through productive engagement with tax advisors across multiple situations, and what’s ahead for BFS Advisory in an environment where tax smart wealth management matters more than ever.
WSR: How can financial advisors avoid friction with tax advisors, build more trust with one another and stay aligned on work for shared client relationships?
Both wealth managers and tax professionals fall into the category of “trusted advisor,” and should be focused on the client’s needs and goals. Due to overlapping but distinct practice areas, there can be friction between wealth managers and tax professionals in both design and implementation of tax strategies.
The best practice is to stand shoulder to shoulder with our client’s advisors, and to maintain open and clear communication about the client’s goals and who is accountable for implementation.
Direct discussions with the tax professional are more efficient and collaborative than conveying information through the client, as long as our client agrees to it. We share information seamlessly with our client’s advisors through our online vault, which reduces friction for tax preparation and analysis.
We also plan strategy sessions with CPAs outside of their busy season, especially if we know that we will need their input on certain issues – like Roth conversions – during their busy season.
WSR: How do you think financial advisors should go about creating and growing a stable of tax advisors who can partner as effectively as possible with their businesses?
It’s important to have a range of tax advisors that you can match to your clients. We have a wide list of tax advisors that we refer, based on the client’s preferences and needs. For example, a client who has been retired for ten years with a modest estate size needs a completely different resource from a client in her 40s who owns a growing company with high cash flow that she plans to sell in ten years.
Some of our clients prefer large firms if they need breadth of knowledge, and some prefer boutiques if they want to be able to get to know their tax advisor and stay with the same person for many years. Some of our clients – both male and female – prefer an all-female team and request a female tax advisor.
For all of our clients, we start with matching the needs of our client to the capabilities of the firm, and overlaying an analysis of the fees to ensure that there is solid value in the services.
WSR: Do you see the importance of tax smart financial advice further intensifying in importance, and if so, how can financial advisors best position their businesses to succeed in this new normal?
Taxes will continue to be a significant focus for wealth managers for the foreseeable future, and the opportunity is in knowing your client extremely well as the tax laws continue to change frequently.
We can no longer count on a tax strategy still being available in a few years, so it’s crucial to evaluate opportunities each year, in the context of a lifetime of tax paying.
We look for “tax dessert” years for our clients, when they have unusually low taxation to implement taxable strategies, such as working with our families that are focused on legacy to strategically convert Traditional IRAs to Roth IRAs.
Entrepreneurs have enormous opportunities to implement smart tactics to achieve the goals of their family and their business, from retirement plans (401k plans, Defined Benefit Plans, and Profit Sharing Plans) to ownership structures (ESOPs, partnerships and corporations) and corporate philanthropy.
As wealth managers, we should also have Plan B mapped out in the event that our strategy is no longer available. For example, the changes that could occur due to the American Families Plan may affect capital gains, grantor trusts, and income tax levels, so we are developing alternative approaches where necessary.
Janeesa Hollingshead, Senior Editor, can be reached at firstname.lastname@example.org