Tax planning is the new client-acquisition play

Somewhere in your client base there is an estate plan carrying a $15 million mistake, one that was drafted correctly but written against an estate tax exemption that has since become permanently higher. The formula clause inside it was precise when the document was signed; precision turns into a trap. The only people positioned to catch it are advisors who ask a document question before review season ends.

Sowell Management launched an Advanced Planning Group this week to put tax work at the center of estate and advanced planning for advisors on both of its platforms, while Longview Research Partners priced the annual drag from forced bond and REIT payouts at 1 percent for high-net-worth clients; behind both sits the permanently higher estate tax exemption that has silently changed what old formula funding clauses do. Read together, they make tax planning the client-acquisition battleground.

Platform capital usually lags: by the time a firm builds an Advanced Planning Group, it has already watched too many client conversations go elsewhere for tax reasons. A solo advisor can run the same play earlier and cheaper with a letter, a ninety-minute meeting, and the two numbers the client has never seen on a statement.

The first move is the letter. Model it this way: “Your estate plan contains a formula clause written against an estate tax exemption number that no longer governs. Because the exemption is permanently higher, the clause may produce a different result than you intend. I would like ninety minutes to re-run the calculations before the next review cycle buries the issue.”

The letter works because estate plans are static and the tax code is not: a formula clause does not reconsider when the exemption number changes; it simply reads the law on the day it is administered. The client's expectation may still describe the old world, while the document is already living in the new one.

Timing matters as much as content, and this review season is still the comfortable window to catch the damage. Once year-end statements land and tax-season urgency takes over, the same conversation turns reactive: raised now, the subject looks like vigilance; raised later, like an agenda.

Do not aim the letter only at clients with known estate-tax exposure: old formula funding clauses predate the current exemption, and the client who has not updated a plan in a long time is often the one other firms are not calling. A specific issue outperforms a generic annual-review invitation, and the $15 million formula-clause question is that issue.

Longview's number supplies the second subject for the meeting. Bond coupons and REIT distributions are forced income in a taxable account, and the client cannot avoid receiving them without selling the position, which is why Longview Research Partners prices the annual drag at 1 percent for high-net-worth clients. That is a real figure, and it belongs beside every fund expense ratio in the review.

The sentence that changes the meeting is: your fixed income is costing you 1 percent a year before we talk about fees. Asset location is usually treated as a back-office exercise, but with a price attached it becomes a portfolio decision, and the conversation moves naturally to where the bond allocation should live, what the after-tax return actually is, and which holdings belong in a retirement account rather than a taxable one.

Sowell's Advanced Planning Group makes the same judgment with a balance sheet: tax and estate architecture will keep assets on the platform. For an RIA without a tax division, the competitive answer is simpler—make sure every senior client meeting has a tax moment; the formula clause provides the moment, and Longview provides the arithmetic.

Policy points the same way. The first item on Tax Foundation's revenue-raising list is modest per client and reflects base-broadening over rate-raising, which tells wealthy clients to expect efficiency to be found in structure rather than in falling rates—and that makes annual document reviews more valuable.

The same meeting should include a question that has nothing to do with tax rates. Parton's giving illustrates the distance between writing checks and building the organization that keeps writing them, and a client who wants to be remembered for generosity needs to decide which model matches the goal; the answer determines whether the estate plan carries a charitable vehicle and who in the family runs it.

The week's Slott Report Mailbag clears the rollover clock and supplies a free-money-first framework for weighing a Trump Account next to a 529 plan: take the free money first, then do the tax math. A Sec. 530A account, in the same discussion, fits only after the family answers what the money is for—in education planning, as in estate planning, purpose precedes product.

None of this reaches a client unless an advisor sends the letter, though the tax code has already created the reason and platforms are already paying for the capability. The firms that win this review season will be the ones that open with the formula clause, put the 1 percent on the page, and leave the client with a question about purpose, not just performance.