Smart Marketing January 2007

Right now most of our clients, and our prospects, are knee deep in income tax preparation. That means their ire over paying taxes could not be higher. For you this means a seasonal open door that can lead to year-round servicing of new and existing clients.

What's amazing, but fortunate for the smart marketer, is that few advisors are using tax planning in the marketing message. CEG Worldwide research a couple of years ago discovered that income tax planning was one of the most sought after services from advisors by affluent investors. Yet, less than 20% of all advisors were offering any level of tax planning assistance that would enable them to tap into this broad market.

Let's differentiate here between tax preparation and tax planning. Tax preparation is that awful ‘rear view mirror' catharsis we all go through. Tax planning is the process of trying to make things better in the future. That's your open door. Experience shows that if you communicate to your target audience that you might be able to assist them in solving the problem of paying too much tax, you will find yourself with a stream of prospects.

Next Steps

Now, let's flesh out your problem-solving message with some tangible concepts:

1. Talk about 1099's

A lot of investors are going to get their 1099 tax-reporting forms late this year. USA Today said that at least 5 firms – Morgan Stanley, Merrill Lynch, Wachovia Securities, Edward Jones and Raymond James – are delaying mailing out at least some 1099 forms, which report dividend and interest income. The brokerages received month long extensions from the IRS to send them out after the January 31st deadline.

A spokesperson for the Securities Industry and Financial Markets Association said to expect “millions” of amended 1099's due to errors in reporting. The delays and the errors are the product of a tax law change requiring the 1099's to report tax-exempt interest and the portion of that interest that's subject to alternative minimum taxes.

If that's the problem, what's the solution? Minimize 1099's in the future, if that's possible. How? Tax deferred annuities and certain government savings bonds don't create 1099's until amounts are withdrawn from the account.

Looking for a marketing tool? At BuildYourMarket.com , we have loaded new tax planning cards for you to send to your target audience. You can incorporate these cards into a Tax Season Campaign and schedule the follow up phone calls with our easy-to-use Action Plan tool. This tool lets you create your action plan using any combination of mailings and touch points on a timeline of your choosing, and then lets you apply that action plan to a group of clients or prospects. The BYM platform takes over from there, fulfilling the mailings through our variable data printers while putting the phone calls or other methods of contact onto the Dashboard of the person in your office to whom you assign these points of contact. It even creates a touch point in your database to tell you which cards got sent to which persons. It couldn't be easier.

To learn more about how BuildYourMarket.com's Action Plans and Touch Points can help you market your business, go to www.buildyourmarket.com and click on the webinar schedule to register for their Power Marketing webinar.

2. Focus on IRA's

According to a study reported on Investmentadvisor.com, fewer than half of Americans have an IRA, and just 7% of non-IRA holders plan to open one by the April tax deadline. Further, just 37% of current IRA holders contributed money to their accounts in 2006; only 16% said they were extremely/very likely to contribute before this year's April 16 deadline.

The study suggested that it was a lack of understanding about how IRAs worked that might be keeping people from taking full advantage of the IRA deductions. For instance, 46% of non-IRA owners surveyed thought they had to contribute the maximum amount when opening an IRA and 59% did not know they could contribute to a rollover IRA to consolidate retirement benefits.

Click here to view a sample of BuildYourMarket.com's GROWING a Thriving IRA Rollover Business PowerPoint presentation. This PowerPoint presentation is a part of the Growing a Thriving IRA Rollover Business value-added marketing program (VAMP). To view the VAMP and many others in their entirety, go to www.BuildYourMarket.com and subscribe to this revolutionary marketing solution.

Americans are looking for education on financial planning. You have a tremendous opportunity to use education about IRAs as a springboard to new, stronger client relationships.

What kinds of tools can you use to demonstrate your value as a financial planning educator? Start with a focused newsletter. For example, in BuildYourMarket.com we have loaded two-page print and e-newsletters on IRAs and taxes. These are full color, branded to you, and personally addressed to your recipients. All you need is a minimum of 25 recipients and you can start your educational newsletter campaign! What a great way to ‘drip' on clients, centers of influence or people who attended your seminars in the past!

Bonus Tip: A recent tax law change gives taxpayers the option of having their tax refund deposited directly into an IRA, Roth IRA or a SEP-IRA (but not a SIMPLE IRA). The IRS has issued form 8888, which is the form that will be used to direct an income tax refund to up to three accounts.

This is a good idea, in theory. But Ed Slott, IRA guru, says he can think of at least 15 things that can go wrong with this concept. Here are just a few:

What if the tax return is held up in the mail? If the IRS receives the return too late, the automatic deposit might be applied to 2007 rather than to 2006. Slott says to allow at least six weeks for paper returns and three weeks for electronic filings to avoid cutting the deadline too close.
The account must be open. The IRA must be established before the direct deposit is requested. If the account is not previously established, no account number will exist to allow proper completion of the direct deposit form. A corollary problem could be a wrong account number. If the number entered on the tax form varies by even one digit and does not pass the IRS' validation check, the IRS will mail a check for the entire refund that, you guessed it, will arrive too late for a 2006 IRA contribution.
IRA contribution amounts could be exceeded. Some taxpayers may not know that there are limits for IRA contributions and may direct a refund of say $18,000 to their IRA when the annual limit is $4000. The IRS does not say that the direct deposit would be rejected, but does say that if it exceeds the limit, there could be a penalty (excess contribution penalty).

Guidelines: Don't use the direct deposit for 2006 IRA contributions unless the return is filed early, leaving enough time to confirm the deposit.

Use this provision prospectively only for clients. That is, if you are using it now for the 2006 tax return refund, have the contribution made for the 2007 tax year so you don't have to worry about any deadlines.

3. Get into the 1040 Tax Returns

The clients' 1040 is a wealth of information. Here are just some of the things you can mine from the 1040:

Hidden Assets – Schedule B shows income producing assets. Schedule A (for itemized deductions) will show you investment interest. It will also report any IRD or income in respect of decedent, which is often associated with inherited IRAs. On the first page of the 1040, have they checked the box that means they are over age 65? Doe they have grandchildren? What about 529 plans?

Networking Opportunities – look at the bottom of page 1 for a tax preparer or on Schedule A for tax preparation fees. These are professionals that might be working with more clients like this one.

How do you get started working the 1040? In BuildMourMarket.com, we have a Learn module stockpiled with a mountain of training material including videos, presentations, scripts, marketing tips and exercises and detailed action plans. All of this will equip you to become a better tax-planning advisor.

To learn more about working with your clients' 1040s, view a sample of the Marketing Tips that accompany our Unlock the Secrets of the Tax Return program.

If you want more information on BuildYourMarket.com, go to www.buildyourmarket.com and click on the webinar schedule to register for their Power Marketing webinar.