Why We Created a Taxes Saved Report

Most tax management is mediocre. How do you demonstrate your excellence?

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You and your clients have probably been receiving 1099s and other tax forms for a few weeks now. A sign that tax season is upon us.

As faithful readers know, the Smartleaf system has a “Taxes Saved” report that shows how much an advisor has saved each client in taxes through tax management. We think it’s pretty neato, but there’s a “dark side” to the origins of this report that we wanted to share.

We built the Taxes Saved report so that our clients could document the value they provide. Tax management is not the only — or even most important — service that advisors provide. In fact, we think it is best viewed as “table stakes,” something that should just be expected, like working brakes on a car. But (like car brakes) that doesn’t mean it isn’t important. The value of tax management alone is greater than most advisors’ fees.

Here’s the rub. Car buyers can tell pretty easily if their brakes work. It’s much harder for investors to know whether their advisor is doing a good job of tax management (or, really, any tax management at all). A lot of advisors talk about great tax management. Not all of them deliver. This may not be commendable, but it’s understandable. If investors can’t tell the difference, what incentive is there to put the work into doing tax management well?

Smartleaf users tend to do a pretty darn good job of tax management. (We’ll take partial credit for helping, though most were working hard at tax management long before they started working with us.) They were the real thing. But we did hear about how challenging it was to get clients and prospects to appreciate this. And that’s when the bell went off. It wasn’t enough to do good. You had to be able to show that you were doing good. (We know, it’s kind of obvious — it took us a while, but we got there eventually.) So we developed our Taxes Saved report to help advisors who really were adding value through tax management differentiate themselves from those who weren’t. You can see the average results across our user base in 2017 here: Documenting the Value of Tax Management: 2017 Taxes Saved.

Last year, we wrote a post about the value of, well, bragging — as long as that bragging is backed by data. That post was partly tongue-in-cheek. We don’t think showing clients that you did your job well is actually bragging. We think it’s just good business.

For more on this topic, check out A Guide to Tax Management.