Tax planning has always played a role in financial advising, but in recent years, it has evolved from a secondary service to a core component of comprehensive financial planning. As clients demand more tangible, immediate value, advisors are shifting their approaches—moving beyond basic tax strategies to proactively analyzing tax returns, optimizing Roth conversions, and implementing tax-efficient withdrawal strategies.
At RightInsights, RightCapital’s inaugural virtual event held in February 2025, Michael Kitces (Chief Financial Planning Nerd at Kitces.com) shared his expertise. He dove into why tax planning is an important service for financial advisors and how to integrate it effectively into your practice. From overcoming compliance concerns to leveraging technology for real-time tax analysis, Michael outlined the key trends shaping the future of tax planning:
1. Tax planning is evolving for financial advisors
While tax-planning has traditionally been included in financial advising (for example, when it comes to taxes related to annuities or tax-deferred insurance products), as the depth and breadth of planning has grown, there has also been a shift in what tax-planning actually entails. Michael pointed out, “The nature of tax planning now is different. We've gone from, ‘I do tax planning around what I'm implementing for you’ to this realm of ‘I'm going to pull out your tax return and see if I can find opportunities and ideas that might lay some additional value on you.’”
Michael touched upon several ways advisors are including tax planning into their offerings. 16% of firms are providing actual tax preparation services, but you can include it in other ways, such as the more traditional approach of considering taxes while implementing a new product, or opportunities identified during comprehensive financial planning such as Roth conversions or tax-efficient distributions.
With all that said, Michael is seeing the majority of the shift is seen in the following situation: “The place we're really seeing the growth is the movement from tax planning attached to the product to tax planning attached to the financial plan to tax planning attached to some kind of client service calendar that says we're going to do this as part of our end-of-year process for you every year,” which is a way advisors can show their value on an annual basis. Michael also notes that the improvements in financial planning tools have made it easier to increase the tax planning from what may have been done during the initial plan to something more ongoing.
2. Tax planning demonstrates tangible benefits
It may take decades for the results of long-term financial planning to come to fruition and Michael notes the more comprehensive financial planning becomes, the more intangible it can become as well. He quipped, “I don’t really get to prove (my worth as an advisor) until you actually get to retirement and go, ‘Wow! This retirement is amazing. Thank you, Michael, for working with me over all these years.’”
In comparison, tax planning provides immediate, measurable benefits, helping advisors strengthen client relationships and justify their fees. Michael noted he can share with clients, “‘I would just like to point out to you that I literally saved you $3,722 in actual taxes last year by finding this opportunity on your tax return.’ There is something about the concreteness of hard-dollar tax savings that also becomes a lot more appealing…tax planning becomes one of these super tangible things like "I saved you this (amount of money).”
3. Financial advisors can legally offer tax planning
Michael acknowledged that in some larger firms, advisors have traditionally been discouraged from offering tax advice, but he also notes an important distinction between what he calls “Big T, big A ‘Tax Advice,’” which is what CPAs do, versus “Little t, little a ‘tax advice.’” The latter is “recommendations to improve clients’ tax situation and arrange affairs in a way that will reduce tax liabilities, because that's a flat out value I can provide. That usually helps me reinforce the relationship.” By recognizing this difference, advisors can avoid compliance concerns while still bringing value to the table for clients.
4. Asset location strategy can help advisors and clients
Asset location is a lesser-known tax-efficient investment strategy that focuses on where different types of investments should be placed across various account types to maximize after-tax returns. Most investors have three main types of accounts—taxable, tax-deferred, and tax-free—all with different tax characteristics.
Traditionally, many investors and advisors mirror the same asset allocation across all accounts (e.g., maintaining a 60/40 stock-bond split in each account). However, a more tax-efficient approach is to manage investments at the household level instead of at the account level, reducing tax liability and enhancing long-term returns.
Many modern financial planning platforms now include built-in asset location tools, allowing advisors to strategically allocate investments across multiple accounts while ensuring the overall portfolio maintains the desired risk and return profile. For financial advisors, leveraging technology-driven asset location strategies can provide a competitive edge and deliver greater value to clients.
5. Technology makes tax planning easier
Financial planning software has made it easier to model tax-efficient withdrawal strategies, Roth conversions, and asset location. Advisors are leveraging these tools to provide data-driven, visual insights that help clients understand tax strategies. Michael noted, “A long time ago we would try to do (tax planning) with spreadsheets, with some varying level of pain. Now, increasingly, we can do it in financial planning software…at some point we just need a calculation engine to do this and get to the numbers.” He spoke about the convenience of being able to show multiple scenarios to show how much money a client could save by changing their strategy.
Disclaimer: This article is intended to provide educational insights based on Michael Kitces’ presentation at RightInsights. The inclusion of Michael Kitces’ commentary does not imply an endorsement of RightCapital, its products or services by Michael Kitces or Kitces.com. References to tax planning strategies and technology solutions are for informational purposes only and should not be considered financial, tax, or investment advice.
How RightCapital can help with tax planning
In addition to our previous market-leading tax planning offerings such as Roth conversions and tax-efficient distributions, RightCapital has released two big updates over the last year to enhance your tax offering to clients while also saving you time as the advisor.
Tax Strategies, released in late 2024, allows for advisors to summarize important visuals, dive into asset location (as discussed above), and solve for the top five optimal tax strategies with just one click, ultimately strengthening advisor-client relationships. To learn more about this offering, click here.
Tax Analyzer, introduced in early 2025 for Premium and Platinum subscribers, enables advisors to securely upload tax forms and assess tax impacts directly within RightCapital. Upload tax returns, discover tax-smart opportunities, and evaluate the impact on deductions, exemptions, and credits. For more on this feature, visit this page.
If your practice is interested in learning more about RightCapital’s tax-planning tools, schedule a personalized 1:1 demo today. To stay up-to-date on future events from RightCapital, sign up for our newsletter here.