Stephen Curley, a CFA charterholder and chief investment

officer (CIO) at WaterOak Advisors in Winter Park, Fla., says

investors should be wary of any adviser who tries to be the

“jack of all trades.” An investment adviser who takes a course

in taxes may learn just enough to understand when to loop in

an experienced tax attorney or CPA on a technical matter—but

probably not enough to handle all tax issues for a client.

Curley says his firm doesn’t have an in-house tax professional;

its investment pros work closely with clients’ CPAs to help

achieve objectives. “There has to be a relationship with the

tax professional to understand your best moves,” he says.

“For example, you don’t want to be aggressively harvesting

losses for your client if they have a half a million dollar loss

carry forward.”

One of the biggest challenges firms face in creating an

effective, collaborative culture between experts is also the

least tangible: Who’s in charge?

Investors may have a primary point person within an advisory

firm—typically the financial planner—whom they deal with

most frequently. But they should get a sense of teamwork

within the advisory firm, too. The most effective advisers

understand the limits of their expertise, and aren’t hesitant

to loop in another pro, says Gerry Herbison, assistant profes-

sor of management at the American College of Financial

Services. “The smart advisers understand they need to

be part of a team rather than compete to be in charge of

the team,” he says.

Investors should demand an expert be included in a

conversation if they feel their questions aren’t sufficiently

answered. Even better, ask for regular meetings with

both tax and investment experts to become proactive in

meeting goals.

“Knowing the clients and their goals, knowing the structure

of their accounts and their plan, is essential to what we do,”

says Laufer, whose firm has such team meetings with clients

on a quarterly basis.

Collaborative sessions were vital after the recent passage

of the U.S. Tax Cut and Jobs Act, which went into effect last

year and is chock-full of new provisions that wealthy clients

can benefit from with savvy planning.

This content was paid for by CFA Institute and created by the Penta advertising department. The Penta news organization was not involved in the creation of this content.

Traditionally, the primary providers of comprehensive

services for wealthy families were the private banking

arms of large commercial banks. As wealth boomed

through the 1990s bull market, many advisers began

to switch from commission-based structures to fee-based

ones. Multi-family offices cropped up as one-stop wealth

management options. Their aim was to appeal as a

better cultural fit for high-net-worth folks than the staid,

buttoned-up banks.

Through the latest wealth boom since the financial crisis

in 2008, assets managed by multi-family offices have

ballooned 140%, according to the Family Wealth Alliance,

a Chicago-based group that tracks the industry. Meanwhile,

financial planning and investment firms increasingly have

adopted the “wealth adviser” moniker as they broadened

services to appeal to the high-net-worth market.

However, adding the tax component to services isn’t a simple

transition. “The idiosyncratic needs of wealthy families vary,

so you can’t just hammer the same nail with one client as

the next,” says Jamie McLaughlin, a wealth management

consultant based in Darien, Conn. “The conversation that

was already complicated with the $5 million or $10 million

client gets a lot harder with the $25 million and $100 million

client when you start talking about dynastic matters and

family governance.”

So investors should size up the credentials and experience of

the tax experts within an advisory practice, making sure they

have a track record of handling wealth transfer, charitable,

and other needs of high-net-worth clients, McLaughlin says.

Even removing estate planning and broader financial planning

issues, managing wealthy clients’ investment portfolios for

the best tax result is a massive undertaking.

Wealthy families’ investment portfolios aren’t your typical

stock and bond mix, and include a range of investments,

each with different tax implications.

A 2016 survey by UBS and Campden Wealth Global Family

Office found that just 37% of wealthy families’ portfolios

were made up of traditional stocks and bonds. Among other

asset classes were private equity and venture capital, hedge

funds, agriculture and commodities, real estate, and real

assets, such as art and collectibles.

The two disciplines are often intertwined in the financial plans of high-net-worth families

SPONSORED CONTENT

How to Marry InvestmentStrategy With Tax Planning

Strong investment returns traditionally have been enough to

warrant bragging rights, but advisory firms are increasingly

touting what they believe is an even greater strength: the

ability to provide sophisticated tax advice alongside

investment expertise.

The two disciplines are so tightly woven through wealthy

families’ financial plans that integrated services are

becoming the new gold standard in the high-net-worth

advisory business.

“There’s so much more involved with trying to hit financial

planning goals than generating strong returns,” says Adrian

Conje, chief executive officer and a Chartered Financial

Analyst® (CFA®) charterholder at Balentine, an Atlanta firm

specializing in planning for high-net-worth entrepreneurs and

business owners.

With a range of in-house experts on tax and investing

matters, the goal is to collaborate to produce the best after-

tax returns and preserve assets. Beyond basic tax-loss

harvesting, strategies range from carefully locating assets

for the best after-tax returns and arranging for the best after-

tax income streams, to creating trusts and tax-favored

entities to transfer assets to next generations.

“It’s not what you make that’s important, it’s what you get to

keep,” says Alan Laufer, director of financial planning and a

certified public accountant at Silvercrest Asset Management

Group, a New York firm made up of investment experts,

financial planners, and tax specialists.

Consider newly-created Opportunity Zone Investments.

These are private investments in projects intended to revitalize

communities, and they allow investors to defer and possibly

avoid capital gains.

The potential capital gains savings would make any tax expert

salivate: By investing capital gains in these opportunity zones,

investors can reduce their cost basis by up to 15% if they hold

the investment for seven years. If they hold it for 10 years, all

gains on the investment are shielded from taxes.

But investment experts are needed to sift through options

and determine the potential value and outlook for the

opportunity zones, which can be difficult to assess,

given their locations in some economically neglected

areas of the country.

Investment expertise is critical in many aspects of both

estate planning and charitable giving, as well, which are

typically a tax adviser’s domain. For example, to fulfill

charitable intentions, an investor may decide to donate

appreciated stock—a preferable way of giving because it

removes taxable gains from a portfolio. The cost basis of

the gift gets bumped up to its value when it is made, so

the gain is effectively wiped out from a tax standpoint. To

decide which shares to donate, an investment manager

must comb through a portfolio and weigh the benefits of

donating different stocks. Possibly a client has overlapping

exposure due to holdings both in a mutual fund and

individual stock portfolio. Or, the fundamentals of a stock

with massive gains may have shifted, making it a prime

candidate for a gift. The charity can sell out of the position

without a tax hit.

On these issues and all aspects of investment and financial

planning, “our investment and tax professionals work hand-in-

hand,” says Jason Price, a CFA charterholder and CIO at

Philadelphia-based Glenmede. “It’s the best route to get the

best results.”