If You Have $5M+ and Your Advisor Hasn’t Mentioned This, Fire Them

I’m about to tell you about the one thing that if your adviser hasn’t mentioned it and you have over $5 million, you should probably fire them.

Now, that might sound harsh, but tax planning is at the heart of what we do. We ask for our clients’ tax returns every year, and so should your adviser. The days of an adviser saying “We aren’t allowed to give tax advice” are over. Frankly, that’s just not good enough anymore. Some of the most effective planning we do is around taxes, tax efficient distribution strategies, mitigating taxes when you sell a business, and dealing with concentrated stock positions. These are the things that have a huge impact on your family’s wealth. In this video, I’m going to explain why most advisers are failing their clients when it comes to tax planning, what a truly proactive tax strategy looks like, and what questions you should be asking your adviser to see if they’re actually up to the task. Let’s get into it.

So why is it that most advisers fail when it comes to tax planning? It really comes down to two things: business model and training. They don’t have the education and training required to implement multi-year proactive tax planning. They can talk about asset allocation and retirement projections, but they don’t have the background to get deep into the tax code. On top of that, many of them are limited by the broker dealer or company they work for. They’re restricted in the advice they can give and the products they have available. They’re often pushed to sell cookie cutter solutions that don’t account for a client’s unique tax situation. This is why so many high net worth families end up with a generic investment plan that completely ignores the massive impact of taxes.

The old model: everything is siloed. You have an adviser over here, you have a CPA over here, an estate planning attorney over here, you have an insurance agent over here, and no one is talking to each other. The CPA is a completely separate circle and not connected to the adviser at all. The adviser sells you some products, the CPA reactively does your taxes and looks at them once a year. No one is talking to each other and the adviser says “I can’t give tax advice.”

In the new model, the client is at the center. The adviser, the CPA, and the estate planning attorney are all connected. They’re all talking to each other, working together in your best interest to make sure you have a cohesive plan moving forward. The adviser is the lead strategist, the quarterback, but it’s a team effort. The adviser, the CPA, and other professionals are making sure every decision is made through the lens of your long-term tax plan. It’s not about selling products. It’s about building a strategy.

If that first model looks a little too familiar, don’t worry. You’re in the majority. That’s how most of the industry still operates. But just because it’s common doesn’t mean it’s right. For our clients, tax planning isn’t a separate service. It’s at the core of everything we do. If you’re starting to question whether your current adviser is equipped to handle your complex financial life, we should talk. There’s a link in the description to book a discovery call with our team.

So what does this higher level of planning actually look like? Let’s get into some of the specific strategies. When your adviser is truly focused on proactive planning, the strategies they bring to the table look a lot different than your average advice. It goes way beyond maxing out your 401k. It’s about sophisticated tools that are specifically designed for high net worth families to legally and ethically minimize your lifetime tax bill. These are things like long-short tax loss harvesting, specialized trader funds, cash balance plans for business owners, and even things like private placement life insurance for the ultra high net worth. These aren’t strategies you’re going to hear about from a typical adviser at a large brokerage firm because they don’t have the training to implement it or their firm isn’t set up to allow for it.

Long-short tax loss harvesting isn’t just selling your losers at the end of the year. It’s a sophisticated strategy that generates tax losses throughout the year. The losses created by this strategy can help you offset capital gains from the sale of a business. They can also help you diversify out of concentrated positions tax efficiently. It’s about manufacturing tax alpha. Tax alpha is persistent. Market alpha is very hard to obtain. Outperforming the stock market is very hard to control. But controlling for taxes utilizing tax alpha is something within your control and is very persistent.

For successful business owners, a 401k is just the start. A cash balance plan is a type of pension plan that can allow you to save enormous amounts of money pre-tax, even hundreds of thousands of dollars a year. This is extremely effective when you’re in a really high tax bracket and you can save this money pre-tax.

One of the biggest things about tax planning is going beyond the first step. Tax deferral is great, but you’re just kicking the can down the road. You have to implement other strategies to realize true tax alpha. Ultimately, you want to defer taxes when you’re in the highest tax bracket and realize those taxes when you’re in a lower tax bracket. That can mean IRA distributions or Roth conversions. Just deferring taxes doesn’t add true value. You have to follow through with a cohesive long-term strategy.

So how can you tell if your financial adviser is truly up to the task of managing your complex financial life? You have to ask them the right questions. Their answers will tell you everything you need to know about their capabilities, their philosophy, and if they’re acting as a true proactive tax strategist or just a reactive investment manager. Don’t be afraid to put them on the spot. You’re paying for their advisory experience, and you have the right to know if they’re bringing true value to the table, not just investment management. This isn’t about being confrontational. You’re just being a smart consumer of financial advice.

This is your advisor litmus test. Question one: do you review my tax return every year? The answer should be an enthusiastic yes. If they’re not looking at your tax return, they have no idea what your real financial picture looks like, and they’re just managing investments. It’s a massive red flag. Surprisingly, the biggest value an adviser can add isn’t investment management. It’s true tax planning. That’s because the market isn’t controllable. Tax planning is. This can be worth millions of dollars for you and your family.

Question two: do you coordinate with my CPA? Listen to their process. Do they have a formal system for collaborating with your CPA? Do they have joint meetings, or do they just say you should talk to your CPA about that? A real strategist will lead the coordination and it will be part of their process.

Question three: beyond my 401k, what proactive tax strategies are you using to lower my lifetime tax bill? This is where you see if they have any real depth. Everyone knows 401k contributions lower your taxes this year. That’s not groundbreaking. Are they talking about some of the advanced strategies we just discussed, or are they giving you generic boilerplate advice? Their answer reveals their level of sophistication.

Tax planning isn’t a one-time or once a year thing. It’s the most impactful ongoing advice your adviser can provide. The largest bill you’re going to pay for the rest of your life is taxes. So tax planning has the greatest potential impact on your financial life. At the end of the day, you’ve worked too hard to build your wealth to have it eroded by a generic, tax-unaware financial plan. You deserve an adviser that’s as focused on your tax bill as they are on your investment portfolio.