A 2017 study by Morningstar’s head of retirement research, David Blanchett, indicated that taking into account tax implications of a given investment strategy can save investors as much as 60 basis points. Tax loss harvesting can save someone an additional 50 basis points, on the high end. For the end client, smart tax planning far outweighs minor portfolio tweaks in terms of total returns.
Blucora, a publicly traded Internet company with a $1 billion market cap, recognized the value of tax planning and wealth management when it acquired H.D. Vest, an independent broker/dealer serving tax-focused advisors, for $580 million in 2015, a premium price at the time. The firm put another stake in the ground with the purchase of 1st Global, an independent broker/dealer with a focus on larger CPA practices.
Blucora is now going all in on tax-centric wealth management, recently announcing plans to combine the two IBDs and rebranding them with “tax” in the name: Avantax Wealth Management. Enrique Vasquez, the former head of Cetera’s tax-focused b/d, was tapped to lead the firm; with 4,200 advisors and $67 billion in client assets, it’s the largest group of tax professionals doing wealth management in the country, Vasquez claims.
“Most of the time, advisors are referring clients, ‘Go see your tax professional; I can’t talk to you about that,’” Vasquez said. “We have the ability to integrate it all in one solution.”
The two IBDs have long histories in tax-focused wealth management; H.D. Vest founder Herb Vest was instrumental in getting the AICPA to change its code, which prevented accountants from accepting commissions, in the late 1980s.
“These two firms were the leaders in getting tax professionals and accountants able to provide broader financial services to their clients,” Vasquez said.
With Blucora’s backing, Avantax will have more resources to build out what Vasquez calls “tax-smart solutions,” tools that help its advisors give clients more tax-efficient advice.
Early next year, the firm plans to roll out Avantax University, a training program for new advisors. Advisors will learn the products and tools available to them, and ideally, will also become subject matter experts on tax and financial planning. The firm’s enterprise growth team will work with these advisors as they grow their practices.
The firm is also developing an administrative assistant track, understanding that a client’s experience often is shaped by interactions with administrative staff, and arming those individuals with an understanding of the topics at hand can make sure business gets processed appropriately and efficiently.
An automated tax loss harvesting tool is also in the works, which will quantify the opportunity for advisors and alert them when they should take action—not once a year, but on a continuous basis.
“I firmly believe that in order to do a comprehensive, holistic solution for a person, you really have to take their tax situation into account.”