Here in the middle of tax season, whether you like it or not, clients feel that this is their time to communicate directly with you. Even the once-per-year tax clients need to interact with you during this compressed season of work. From here, you have two choices.

You can be a commodity, like a “wham-bam” provider of tax preparation services, or you can be the trusted advisor.

If you are building a wealth management practice or want to deepen your role as their trusted advisor, take the time to find out what is going on in your client’s life and become more significant to them. This isn’t hard to do, but you need to avoid the temptation to rush them through the process and hear what is on their mind. Furthermore, with just a little thought, it is very easy with the information presented to prepare their taxes to recognize gaps in their financial plan that need fixing.

At first, the content of this article was designed as an eight-hour CPE course to help CPAs recognize issues in their clients’ lives that need mending. Even the most dubious, know-it-all CPA came away with new knowledge and was better prepared to deepen the nature of the services that they delivered. However, what I have learned by interviewing some of my students was that CPAs were indeed smarter, but they haven’t yet elevated the service experience for their clients.

What most practitioners did was to take this new knowledge and give orders to their clients such as:

  • “You need to change your beneficiary elections.”
  • “You need to update your estate plan.”
  • “You need to start saving for college.”
  • “You need to invest that idle cash.”

Sure, these dictums made you seem smart, but why is it that you generally bark the same orders year after year, with little to no progress? It’s because all you did was flex your brain muscle, while offering little in the way of how to get that done.

Create a process so that your clients can benefit from your wisdom and resolve these potentially significant gaps in their financial lives. This process will add time to the tax interview or conversation for sure, but it will be the start of your clients seeing you in a different, more glorifying light.


While you’ll certainly discover significant gaps in their financial house, clients like nothing better than to talk about their family. So don’t just dive into the numbers — start the conversation right at the top of the Form 1040, and talk about dependents. If there are no dependents on the return, find out if they’ve got mature children out on their own, and coinciding grandchildren. The questions may include:

  • How often do you get to see your grandchildren?
  • Have you or your child begun a college savings plan?
  • Does your adult child have a current estate plan with appropriate guardians selected?
  • Are all of your children and grandchildren healthy?
  • Are their marriages healthy?

For your clients with minor children listed as dependents, some of the questions may be the same, such as college savings, or health or guardian selection in their estate documents — although other issues such as income shifting or creating a Roth IRA may also be appropriate. If these children are over the age of 18, it is appropriate to ask whether they’ve got a will or properly executed health care documents.

While on the topic of family, take this opportunity to ask about your clients’ parents, if they are still living. Find out whether the parents are healthy and financially independent, or if they will be a future financial obligation of your client. If they are financially independent, ask your client if they have any role in their parents’ estate planning documents, whether as executor, trustee or health care power-holder. Most of your clients will look at you quizzically and answer that they have no idea. Pursuing this issue often leads to a discovery that a parent’s estate is in a poor condition, setting your client up for a messy role to clean it up after their passing.


As you move on to the numbers portion of the process, take a critical look at Schedule A and search for opportunities to be more helpful. Find out what the rate is on their mortgage, or if they should even have a mortgage in the first place. Many clients like a mortgage because it gives them a tax deduction. However, you may have to break the news to them that their after-tax cost of the debt is still higher than what they may be earning in a very conservative savings program.

Take a closer look at their charitable giving patterns. Perhaps they are a candidate to donate appreciated property or to establish a foundation or gift trust account to help reduce their current taxable income — especially if they may have lower taxable income on the horizon from a job change or retirement.

When getting to interest and dividends, use that Schedule B for more than making sure that the right numbers go on the correct lines. Take a look at the 1099s and examine the ownership of the account that is cause for the 1099. If it is held in individual or joint name, that may be evidence that there is no current estate plan or that the plan they paid big money for was not properly implemented. They may need a full estate plan or to simply use the one that they’ve got and change the title of their accounts to the trusts frequently established in a well-designed estate plan. The benefits of that could be a simplified estate settlement process, privacy, and ultimate death tax savings.

Schedule B also gives you a glimpse into their savings and investment style. Too much interest income in today’s environment may appeal to their need for safety, but do they realize that their net returns after tax are significantly lower than the rate of inflation and are causing them to lose purchasing power on their money each year that they invest so conservatively?

Ask if there is any interest income that should be reported on their Schedule B. For example, have they made any loans to friends, family members or to their business? You can use this opportunity to explain the concept of imputed interest and asset protection. Any loan that is undocumented and not properly secured is a very risky proposition that can cause a total loss. Reflect back on the client who loaned money to a child to buy a house that was later lost in a divorce.

Schedule B also gives a good glimpse at their portfolio construction. Do they have dividends that are concentrated in just a few blue chip holdings? This may be the way that their dad built wealth, but as you know, it may also expose them to more risk than they imagine with the concentrated positions.

Let’s bridge over to Schedule D, and talk about trading, gains and losses. Too much trading or not enough trading is evidence that the investment strategy may be all over the place. While churning is not as common as it once was, it should be addressed for the sake of the client. For example, it is still possible to discover an account that has churned to the tune of over $250,000 in trading commissions per year with $2 million out of $6 million in one stock position and nearly a $2 million loss carryforward. That broker should be sued.

The reverse may also be a problem. In these days of fee-based asset management, the Securities and Exchange Commission is now looking at managers for reverse churning. Reverse churning is a nice term for when the advisor is not paying attention and not doing anything but sets the portfolio and forgets it — which may not warrant quarterly fees.

For your clients who have a self-employed business, a discussion on risk and choice of entity may be needed. For clients whose Schedule C is a second income, such as director’s fees, writing or speaking, perhaps a retirement plan to shelter that income is appropriate. They may not be aware that there are options for deferral with that side income.

Schedule E is the holy grail of information. There is so much that gets reported there that it alone could be the source of numerous financial planning engagements. Let’s begin with a discussion of the flow-through entities.

Ask detailed questions about the entity: Is there a written agreement among the owners? What happens if an owner dies, becomes disabled, and gets sued or divorced? Is the succession language clear and accurate regarding valuation and what happens when?

For your clients who are landlords owning property in their individual names, Schedule E will reveal all. This warrants a discussion on risk and how one problem in any rental property owned individually can cause a ripple risk throughout all of their assets. These issues are magnified if the rental property(s) are owned jointly with a non-spouse. This is common for inherited real estate that becomes rental property. Does your client realize that a rental property owned jointly with her brother may actually go to her brother upon her passing instead of to her husband — regardless of what her will says? Probably not. She also may not realize that if her brother gets sued or has other creditor issues that her rental property can get hung up in that litigation.


The worst thing that you can say to a client is: “I see issues that may require attention; let’s talk after tax season.” The best thing that you can say is: “I see issues that may require attention; when can you come back for an hour to talk about these significant issues?”

When they come back, you must tactfully discuss some of the gaps that you discovered and why fixing these issues may be significant. In effect, it is like a first financial planning meeting where you are talking about the issues that you’ve discovered and the remedy in terms of how your firm can help. To do this well requires a desire to truly serve as a financial planner, differing from the many others who give lip service to all of the significant issues simply to sell something or manage assets. The planning engagement is where you’ll get to show your true colors as their trusted advisor and add value.

If you truly don’t have the time to invest in your best clients during tax season, then you should really ask if you are properly equipped to offer wealth management services. If you don’t offer these services, simply recognizing the issues for clients won’t get the job done — you must follow through with an introduction to someone that you’ve got the confidence can do the entire job well.

John P. Napolitano

John Napolitano, CFP, CPA, is chairman and CEO of U.S. Wealth Management in Braintree, Mass. Reach him through JohnPNapolitano on LinkedIn or (781) 849-9200.