Smart-householding provides advisors a different view of their clients’ accounts. This allows an advisor to quantify investing results for the client across all their accounts and holdings, which greatly impacts a client’s willingness to spread out their assets across multiple advisors.
If you’ve ever heard the quote “the whole is worth more than the sum of the parts, it’s higher than each individual element”— the real value is not who has the best insight into planning, but who can put it together in a consolidated, actionable way that demonstrates the enhanced value the advisor is bringing to their clients.
Here are a few key ways that taking a household approach can set your practice apart.
Create quantifiable improved outcomes
When managing an entire household, an advisor will be able to create optimal investing outcomes by improving the after-tax rate of return, managing costs, and lowering risk, granting them the ability to be able to invest for the long-term and allow assets to grow. By assessing these variables through a household approach, clients become stickier, trust strengthens, referrals increase, and ultimately, advisors gain more assets under management — improving their outcomes as well. All parties involved benefit from this methodology. Advisors can easily demonstrate their value and justify their fees because outcomes can be quantified.
Create tax alpha through asset location
The household management approach allows asset location and asset allocation to play off each other in the correct way. When these methods converge, an advisor can maintain the most tax-smart asset allocation across accounts. Clients can also maintain their risk tolerance throughout the portfolio when a rebalance occurs or in the event of an unexpected withdrawal.
Honor the fiduciary duty
The real question an advisor should be asking themselves is, “Can we truly say we are honoring our fiduciary duty once we are aware that our household isn’t tax-efficient?” At LifeYield, we quantify the results through our Taxficient Score®, which is used as a benchmark to measure the tax efficiency of a portfolio against the most optimal asset allocation. This approach ensures an advisor is acting within the realm of their fiduciary duty.
Advisors today are looking to achieve the household view of all accounts belonging to a client. The next evolution of householding takes that view one step further – taking action and coordinating the accounts in the most tax-efficient way. At LifeYield, we operationalize household management and quantify results to illustrate how much it improves outcomes for both the client and the advisor.
Demonstrate the value of your work using the Taxficient Score.
This case study outlines how GER Loftin Wealth Advisors used the Taxficient Score to show a client how they could save $200,000 on taxes over the next ten years.