Present Your Clients With A Year-End Review

by Mark P. Cussen,CFP®, CMFC (Contact Author | Biography)

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Filed Under: Bonds, Careers, Insurance, Retirement

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 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. (For more information on caring for your clients, check out New Services Usher In New Clients and Become Your Clients' One-Stop Shop.)

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. Thorough attention to each segment of your clients' plans can yield substantial benefits for your clients - and for your business. (To find out how to focus your best attention and skills on your clients' needs, read Find Your Niche Market and Targeting Ideal Customers.)

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? (To learn how to cut your clients' taxes, see Money Saving Year-End Tax Tips, It Is Better To Give AND Receive and Which is better for tax deductions, itemization or a standard deduction?)

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 that invest in municipal bonds, capital losses can be realized through tax-free muni 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. (To offer life-specific services for your clients, see Providing For Older Clients, Become A Certified Financial Divorce Analyst and Helping Young Clients Plan For The Future.)

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.

Conclusion
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.

Having issues with your clients? Find out how to fix them in Deal Effectively With Difficult Clients and Managing (Seriously) Dysfunctional Clients.

by Mark P. Cussen (Contact Author | Biography)

Mark P. Cussen has over 13 years of experience in the financial industry, which includes working with investments, insurance, mortgages, taxes and financial planning. He has two years of experience in writing and editing insurance and securities test training manuals, as well as other financial topics. He has also worked in in retail, discount and bank brokerage systems and been involved in a venture capital enterprise in the oil and gas sector. Cussen has a Bachelor of Science in English from the University of Kansas and completed his CFP®; coursework at the Bloch School of Business at the University of Missouri-Kansas City in August of 2001.

Filed Under: Bonds, Careers, Insurance, Retirement

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