Key Takeaways:
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Table of Contents:
- Life Events: The Milestones That Matter to Tax Clients
- Data Snapshot: The Top Ranking Tax Client Needs at Harness
- 3 Growth Strategies Using Comprehensive Tax Services
- Tax Practice Management Tips for Offering Comprehensive Planning
Life Events: The Milestones That Matter to Tax Clients
Life events and other milestones of individuals and families can serve as catalysts for tax client engagement. For tax advisors who take a holistic view of supporting their clients’ tax needs, we can group these milestones into two categories: professional and personal.
| Tax Planning Client Milestones | |
| Client Segmentation Category | Examples of Client Segments |
| Professional Milestones |
1. Exercise Stock Options: Exercising stock options can trigger significant tax implications, including ordinary income tax on the bargain element and potential alternative minimum tax (AMT) considerations. 2. Secondary Liquidity: Secondary liquidity events, such as selling private company shares, may result in capital gains taxes and require strategic planning to minimize tax liability through timing and valuation methods. 3. IPO and M&A Equity: Initial public offerings (IPOs) and mergers and acquisitions (M&A) involving equity can create complex tax situations, including handling restricted stock units (RSUs), stock grants, and potential long-term capital gains. 4. Starting a Business: Starting a business involves choosing the appropriate business structure (e.g., LLC, S-Corp, C-Corp) for optimal tax benefits, understanding deductible startup costs, and planning for potential future tax liabilities. 5. Business Tax Planning: Effective business tax planning includes strategies to maximize deductions, credits, and deferrals, as well as working to comply with ever-changing tax laws. 6. Changing Jobs: Changing jobs may impact a client’s tax situation through changes in income levels, new stock options, and retirement account rollovers, necessitating careful planning to avoid unnecessary tax burdens. |
| Personal Milestones |
1. Starting a Family or Having Children: Starting a family or having children can offer tax benefits as well as financial planning opportunities, requiring tax advisors to review options personalized to their clients. 2. Buying a House or Vacation Home: Purchasing a primary residence or vacation home involves considerations for mortgage interest deductions, property tax deductions, and potential capital gains exclusions on future sales. 3. Getting Married: Marriage changes tax filing status, which can impact tax brackets, deductions, and credits. Tax advisors should plan to optimize benefits through joint or separate filing strategies. 4. Selling Crypto Investments: Selling cryptocurrency investments triggers certain tax implications, such as capital gains or losses, with specific reporting requirements and potential implications of wash sale rules, making careful tracking and timing crucial. 5. Moving to Another Country: Relocating to another country can affect tax residency status, foreign income exclusion, and potential double taxation issues, necessitating a thorough understanding of international taxes and regulations. 6. Retirement Planning: Effective retirement planning involves leveraging tax-advantaged accounts, understanding required minimum distributions (RMDs), and managing the timing of income and withdrawals to minimize tax burdens. This is an area where tax advisors should consider partnering with wealth managers. 7. Managing Retirement Income: Managing retirement income requires strategies to optimize taxable versus non-taxable income, consider the impact of Social Security benefits, and navigate potential Medicare surtaxes and other retirement-related tax issues. |
By addressing clients’ needs across professional and personal life milestones, tax advisors have an opportunity to position their tax firms as long-term partners to clients. This framing creates the potential for more profitable relationships than simply focusing the bulk of your time on tax preparation.
“Out of the gate, it’s about framing your value proposition to the clients you’re serving and […] sharing the sophistication and resources that you are utilizing with your clients.”
– David Snider, Founder and CEO of Harness
Data Snapshot: The Top Ranking Tax Client Needs at Harness
Tax firms that leverage the Harness practice management platform provide a range of comprehensive services to meet client needs. At Harness, we aim to collect and use data to empower the advisors on our platform to help their clients with immediate and long-term tax and wealth management events.
Below is a list of the top professional and personal milestones tax clients navigate with advisors on the Harness platform.
Source: Harness consumer new user data from July 1, 2023, to June 30, 2024.
Notice that of the top five milestones, two are personal, two are professional, and one is “other milestones,” which is a mix of niche planning needs that clients write in. This diversity of client demands is important to understand if you are exploring ways to grow your tax firm. Being able to offer more services, and ideally, more profitable services to the same clients, can potentially propel the growth of your tax practice.
3 Growth Strategies Using Comprehensive Tax Services
1. Leveraging Comprehensive Tax Planning Can Lead to Referrals
As you build out a wider range of tax services, this has the potential to widen your referral network as well, including from clients and other professional services firms.
- Referrals from clients: Clients who trust you are more likely to refer business to you from their network. This can be especially valuable if you serve high-net-worth clients dealing with needs such as equity compensation or business ownership.
- Referrals from wealth management firms and tax attorneys: Clients have diverse needs that can call for a diverse set of advisors. Wealth and legal advisors can be important partners in thoroughly serving your client’s needs, as well as a strong source of client referrals.
(Did you know? When you join Harness, you become part of a community of advisors, including wealth management firms.)
2. Cross-sell and Up-sell Tax Services Around Life Event Milestones
Once you have decided to offer a more comprehensive set of tax planning services, create a plan to help you have focused discussions around your clients’ deeper long-term needs.
Consider the following touchpoints and how you can use them as a cross-selling opportunity by way of fostering conversations about the milestones occurring in your clients’ lives:
- New tax client onboarding: Give all new clients an onboarding questionnaire that asks a standard set of questions to learn about their deeper tax and financial needs.
- Tax preparation and tax filing: When preparing a client’s tax return, ask what has changed since last year and
- Annual tax client renewals: When renewing engagements with clients each year, ask what their personal and professional goals are for the coming year to help uncover how you can assist them.
3. Build a Marketing Strategy Around Your Ideal Tax Client
Just because you offer comprehensive tax planning services does not mean your tax practice will grow. You need to create a clear marketing strategy, and that begins with knowing the ideal client that you serve.
- First, identify your ideal client by analyzing your expertise and your current clients. Your ideal clients are likely those who you could serve across a range of needs at consistently profitable levels.
- Second, identify the promotional strategies that will allow your tax firm to reach your ideal clients where they are active. Consider exploring curated client leads from Harness.
Tax Practice Management Tips for Offering Comprehensive Planning
As you manage your tax practice’s growth around comprehensive planning services, you’ll likely benefit from working to implement operational efficiencies, including focusing on the following practice management areas:
- Tax Technology: The right tax technology can help scale your practice. Tech tools such as tax client portals, task automation, e-filing, and client renewal tools can prevent you from performing manual, non-profit driving tasks.
- Tax Service Pricing: When it comes to pricing, start by considering which pricing model fits your comprehensive service offerings. Is hourly pricing profitable and manageable? Or are you better off charging a monthly or annual retainer to foster a long-term relationship? Next, look at your prices at least annually and raise them as needed to remain profitable and competitive.
(Bonus: See our guide, How to Price Your Tax Practice’s Services to Drive Revenue Growth.)
- Client Experience: The client experience you create at your tax firm can help to build long-term relationships. Beginning with client onboarding, your tax practice should focus on implementing effective communications and project management processes. For new clients, outline the onboarding process so they know what to expect and standardize the data collection process using a tax client portal, making it simple for clients to provide you with the documents needed to provide them with tax planning services. After onboarding, be intentional about how you communicate with clients throughout the year during annual renewals. Consider how the Harness Concierge team can help you offer a high-touch client experience.
Ready to Grow Your Tax Firm?
Schedule an intro with Harness today to see how our modern software, in-house concierge team, curated high-value client introductions, and professional community can support your tax practice.
Tax related services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances.
