Advisers See Tax Management Playing Bigger Role

An SEI poll released yesterday found that many advisers think they could do more for their clients in the realm of tax management.

According to SEI, nearly 97% of advisers said tax management was a consideration when developing proposals for prospective clients. Yet almost the same number (nearly 95%) of advisers admitted they could be doing more for clients regarding tax management. As the market downturn continues to linger, tax management is emerging as an effective way to recognize losses to offset gains and create more wealth for clients, SEI said, but not all advisers have figured out how to optimize it.

As Baby Boomers retire with large retirement balances, more than a third (34%) of advisers felt clients were “very” tax aware, while more than half (55%) felt their clients were “somewhat” tax aware, according to a release of the survey results.

An overwhelming majority of advisers are not matching gains and losses for tax purposes on an ongoing basis, the release said. Approximately 50% of advisers match at year’s end, while 15% said they rarely, if ever, do so.

“It’s not what you make, it’s what you keep, and continuous tax management throughout the year is a great way to increase a client’s overall portfolio value—especially in these markets,” said Stephen Onofrio, senior managing director, SEI Advisor Network, in the release. “Advisers are telling us that it is a great differentiator with clients, however, they struggle to find the time, resources and expertise to truly leverage tax management on their own.”

The survey demonstrated a mix of products and strategies as the preferred tax management technique for advisers, finding the number one choice is tax managed mutual funds, garnering 36% of adviser responses. Other responses included: tax efficient separate accounts (24%); tax exempt investments, such as municipal bonds (16%); matching gains and losses throughout the year (10%); and harvesting losses on their own at year’s end (8%). Only 6% of advisers said they only focus on gross returns, according to the release.

The poll of nearly 300 independent advisers was administered by the SEI Advisor Network last month.