We recently connected with Michael Paley, Chief Operating Officer of Klingman & Associates, for a Q&A on how tax advisors can collaborate with wealth managers to better serve clients.
Klingman & Associates is a wealth management firm based in New York, most recently being named among America’s Top Wealth Advisors by Forbes for 2024. As a Harness Marketplace member, Klingman & Associates works with tax firms on the Harness platform to refer and serve clients dealing with equity compensation, liquidity events, and other high-net-worth planning needs.
Q: How can tax advisors align with the work of wealth advisors?
One of the essential things from an investment perspective is that we try to get clients to think more like an endowment. You’ve got to create the foundation to help clients be long-term stewards of their wealth. This means understanding the balance between building wealth through concentrated holdings in their business to building more diversified portfolios with liquidity.
Unlike an endowment, taxes really matter. It’s a shift of mindset from the earlier days, when they were building their wealth, and we were more focused on income tax planning. What we often see is people are too late to think about estate taxes. So, the estate tax implications of every decision they make really come into effect.
That’s one of the things we frequently see when people move along what we call the “curve of increasing complexity” from a financial perspective and from a life perspective. It’s an opportunity to help them think about the tax implications of many of their decisions. Whether it’s having kids or buying a second home, there are tax implications that we can help them understand together.
When we’re thinking about people who are business owners, executives at tech companies, and executives at financial services companies, we also focus on understanding what they want their legacy to be or what we call their “guiding family principles.” That’s an area where taxes can matter a lot. These principles create a foundation for wealth managers and tax advisors to have symbiotic relationships that serve the client’s best interest.
QSBS refers to the shares of a Qualified Small Business (QSB) that meet specific requirements outlined by the Internal Revenue Code (IRC) Section 1202.
A charitable remainder trust (CRT) is a type of irrevocable trust that allows a donor to donate assets to charity while still receiving income for themselves or other beneficiaries. The remaining assets are then given to charity when the trust ends.
A charitable lead trust (CLT) is a type of irrevocable trust that provides financial support to a charity for a set period of time, and then distributes the remaining assets to beneficiaries. CLTs can be a tax-efficient way to give to charities while also transferring wealth to heirs.
Q: How can tax advisors and wealth managers leverage technology together to serve clients?
First, it’s useful for tax advisors to understand the tools that wealth advisors are using from a tax perspective. In addition to tools like Tamarac and those provided by custodians, tools like Holistiplan and FP alpha continue to evolve. Take a look at those tools and understand their capabilities to figure out the questions that we’re asking clients.
The second thing is that we are really big proponents of using our client portal. So, in working with tax advisors, we create a client portal for them where we share documents or year-end planning estimates. That technology interface has been really powerful for helping our clients and in growing our business.
Q: How do you work with tax advisors throughout a client’s relationship?
We would like to think about all the touch points in what we consider our client experience.
Our goal as a wealth advisor is to connect with someone the first time we speak with them as a prospect, engage them in a way that they want to become a client, and over time, continue to provide a level of advice and service such that the client becomes an advocate. And the cycle starts over because the client introduces their friends, family and co-workers to us. That’s our business. It’s not overly complex.
But how we serve them, the value we add, the touch points we have, and how we communicate is paramount. And we can think through our client experience in all the different ways that we intersect with tax advisors. For example, with prospecting, there are joint events with tax advisors and client introductions to tax advisors and vice versa.
A critical part of our prospect process is our Mutual Discovery meeting where we get to know so much about them. One of the last questions we ask is, “Who’s your CPA? Do you like them?” It’s astonishing how many times we hear, “No, we’re not happy. We’ve outgrown them. I know I need to make a change.” That question really creates a foundation to help clients build relationships with new tax advisors. I think in the last six months, we’ve probably introduced 10 new prospects to Harness tax advisors in no small part because we’ve asked that simple question.
After the prospect phase, as we’re working with a client, we’re continually engaging with tax advisors. And so the key to any good relationship is communication. We need to touch base with tax advisors for year-end planning or around moments like a liquidity event. We work with tax advisors to address things like charitable giving needs. All these different touchpoints are opportunities to work with tax advisors to make a difference for the client. When you consistently do all this, that’s how you help clients become advocates for you.
Q: What’s one area that clients need the most help with from tax advisors and wealth managers?
A large part of our job is working closely with our clients to help them avoid what we call the unmanaged outcome – this is especially true when someone focuses solely on income tax planning and not enough on estate tax planning. It’s often event-driven. It can be a life event, it could be a business event, but something triggers the realization that they could have, should have, done something differently. It’s really the risk of making a mistake from not fully knowing what to do. It can be too late.
The impact can be quite consequential. If a client anticipates a fair amount of liquidity, the sooner you start to do some planning, the more you can avoid the unmanaged outcome. It can be tough to know what that liquidity is going to be, but as soon as we can help them from a wealth planning perspective and tax perspective, the better.
Harness — A Platform to Help Your Tax Firm Grow
If your tax practice is looking to modernize its operations, Harness has the tech and the people to help you. The Harness platform brings together four key areas to offer not only tax practice management software but also the administrative resources you need to help your firm grow and serve clients’ lifelong needs.
- Curated client introductions – With the goal of maximizing your firm’s profits, Harness pairs you with tax clients whose needs align with your interests and areas of expertise.
- Time-saving tech – From a secure client portal to client engagement templates to automated task updates, the Harness platform provides your firm with a modern, seamless tax advisory client experience.
- Concierge support – From onboarding to client servicing to billing support, our Concierge team enables you and your clients to accomplish more together, faster.
- Advisor community – With continuing education, a practice coach, and a community of like-minded peers, the Harness tax community is designed to help you grow professionally.
Schedule an intro with Harness today.
Harness Tax LLC and Harness Wealth Advisers LLC are wholly owned subsidiaries of Multiplier, Inc., doing business as “Harness Wealth” or “Harness”. Harness Tax LLC provides tax related products and services, and recommendations of third-party tax and legal service providers. Harness Wealth Advisers LLC is registered as an internet investment adviser and solely provides investment advice by referring clients to unaffiliated third-party managers (“platform advisors”) in its capacity as a paid promoter or solicitor. Harness Wealth Advisers LLC is a paid promoter for Klingman & Associates, LLC, a platform adviser. Registration as an investment adviser does not imply a certain level of skill or training.
Klingman & Associates, LLC is a minority investor (less than 1% ownership interest) in Multiplier, Inc., Harness’ parent company. Due to Klingman & Associates, LLC’s relationship with Harness as a platform advisor and investor, this presents a conflict of interest as there is an indirect financial incentive for Klingman & Associates, LLC to promote Harness. Mr. Paley’s comments may not be representative of any other person’s experience with Harness. While Harness provides valuable tools and support, individual results can vary, and success requires effort and leveraging the platform’s resources effectively.
Harness cannot guarantee future results. An advisor’s past performance may not be indicative of future results. Not all advisors have the same skills, knowledge or expertise, including those that have certain credentials. Content should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of Mr. Paley as of the date of publication and are subject to change. While Harness provides valuable tools and support, individual results can vary, and success requires effort and leveraging the platform’s resources effectively.
This article should not be considered financial, tax or legal advice and is provided for informational purposes only. Please consult a financial, tax and/or legal professional for advice specific to your individual circumstances.
