As the holidays approach and another calendar year draws to a close, it's time to evaluate the performance of your clients' investments and overall financial plans. Did they have a good year, or a bad one? More importantly, how do they feel about where they are financially? The upcoming month of December can often be a slow one for many investment and financial professionals; use this time to strengthen your relationships with your clients with a comprehensive year-end review. This article will briefly examine some of the major issues that should be addressed in a financial review and how they can benefit your clients.

Issues to Examine
As the term implies, a comprehensive financial review will cover your clients' complete investment, insurance, tax, education, retirement and estate plans along with how each category impacts the others. Each of these categories may call attention to issues that need to be resolved with some sort of action before year-end. Whether they're young and starting out or nearing their retirement years, thorough attention to each segment of your clients' plans can yield substantial benefits for your clients - and for your business.

Tax Issues
A great many of the possible changes that may need to be made will involve income taxes. Your clients' taxable income, gains and losses should be closely examined to determine what, if any, action should be taken in order to reduce their tax bills. Is a client hoping to itemize his or her deductions on a 1040? If so, are there charitable or other miscellaneous deductions that can be taken this year to get this person over the threshold?

Example - Increasing Itemized Deductions
For example, if a client\'s current total estimated itemized deductions are about $1,500 less than his or her standard deduction, then perhaps a medical or work-related expense can be paid for this year to reduce the shortfall. If this is not an option, then a gift to charity may be in order. If a cash gift to charity of sufficient size is not possible, then a non-cash gift can be another option. Several commercial tax preparers (i.e. Quicken or Jackson Hewitt) offer a program that assigns an estimated value for any kind of non-cash donation, and the IRS has accepted these values as legitimate.

Mutual funds are another area that may need consideration. Most mutual funds post their annual capital gains tax distributions in December, and then reduce their share prices by the amount distributed. This means that clients who are considering selling one or more of their funds should do so before the gains are distributed, and should also wait to buy a given fund until after the distribution is made.

For clients who invest in municipal bonds, capital losses can be realized through tax-free municipal bond swaps, where a bond that is trading at a discount in the secondary market is sold and a similar bond is purchased to replace it. The same strategy can also be applied to stocks; if an individual stock is posting a loss for the year, it can be sold and replaced with shares of an exchange traded fund that invests in the same sector.

Year-end bonuses can provide another opportunity for tax planning. Does the client have an immediate use for the money? If not, then perhaps a lump-sum contribution to a retirement account may be a good idea. This can either reduce taxable income in the current year or provide greater tax-free income at retirement, depending on what type of retirement account is used (i.e. Traditional vs. Roth).

Life-Changing Events
Almost every year, a major event of some sort will occur in the lives of most families or single persons. Promotions, demotions, raises, births, deaths, retirement and college are just a few of the things that will substantially impact your clients' financial lives. All of these issues have separate ramifications that must be evaluated and addressed. If your client's family has grown this year, does his or her income tax withholding need to be adjusted? If your client gets a raise, how could the surplus be spent most effectively? Does the client have elderly parents with health or estate planning issues? The possibilities are too numerous to list.

Show That You Care
One of the keys to a successful year-end review is to focus on what is going on in your clients' lives in a general sense, and not just from a financial perspective. For example, you need to be able to genuinely sympathize with a client who has lost a parent within the past year, and not merely focus on the financial ramifications of this client's inheritance. While any sales trainer or business coach would teach this advice as simple common sense, an emotional connection that is made in what will probably be perceived by the client as primarily a business meeting can pay long-term dividends for your business and work relationship.

The Bottom Line
There are many reasons to schedule a year-end review with each of your clients, but the biggest one is simply to show that you genuinely care about them. Unless you charge an hourly fee as your primary method of compensation, this meeting should ideally come at no cost to the client. Showing your clients that you are willing to add value to your relationship at no direct cost will go a long way toward demonstrating your commitment to them.

Related Articles
  1. Investing

    In Search of the Rate-Proof Portfolio

    After October’s better-than-expected employment report, a December Federal Reserve (Fed) liftoff is looking more likely than it was earlier this fall.
  2. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  3. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  4. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  5. Taxes

    How & Where to File Form 1040 (And Which Version)

    All taxpayers need to know three things when filing a 1040: which form to use, how to file and where to file. After reading this, you'll know all three.
  6. Savings

    Should You Look at 529 Plans Outside Your State?

    529 savings plans are not restricted by geography. So if your in-state offering has high fees or poor investment choices, look elsewhere.
  7. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  8. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  9. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  10. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  1. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  2. Is homeowners’ insurance tax deductible?

    While your fire or homeowners' insurance premiums may be included in your property payments, they are nondeductible expenses, ... Read Full Answer >>
  3. Do financial advisors charge VATs?

    The Personal Finance Society (PFS) and with Her Majesty's Revenue and Customs (HMRC) have outlined when a value-added tax ... Read Full Answer >>
  4. Are mutual fund expense ratios tax deductible?

    The short answer to whether mutual fund expense ratios are tax deductible is "No," but the long answer, however, is more ... Read Full Answer >>
  5. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>
  6. Can the IRS withhold your tax refund?

    If you have any outstanding federal tax or state income tax debts, the IRS may levy any federal tax refunds or state income ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center