New Covisum White Paper Outlines How Fiduciary Advisors Should Discuss Tax Implications of Retirement Strategies

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Covisum president challenges financial planning industry to quit ducking the topic of taxes

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Financial advisors ... who continue to avoid talking taxes with clients could face increased scrutiny and even legal challenges.

Financial advisors have an obligation to understand the tax implications of the retirement strategies they recommend to clients, and the Department of Labor’s new fiduciary rule may present a minefield of challenges for advisors regarding tax issues.

“Financial advisors can no longer ignore that the interactions of various tax provisions can increase a client’s overall tax liability and, as a result, diminish the sustainability of their retirement income,” said Joe Elsasser, president of Covisum, which provides software, training and support to financial advisors. “Those who continue to avoid talking taxes with clients could face increased scrutiny and even legal challenges.”

With initial compliance required by April 10, 2017, the fiduciary rule broadens the scope of where the fiduciary standard will be applied. Now any broker, registered investment advisor or insurance agent who is paid to give advice to a qualified plan sponsor, plan participant or IRA owner is considered a fiduciary, which means their advice must be in the best interest of the client.

“What a court, exam or other outside entity might decide is in the best interest of an individual may not align with what an advisor might think, and the DOL rule is codification of the mentality, so that ‘acting in the best interest of clients’ is not so abstract,” Elsasser said. “A financial advisor’s thought process behind a recommendation might be right, but if their documentation doesn’t prove that they followed a process, they may face challenges.”

Currently, the topic of taxes is like the elephant in the room — many financial advisors know taxes have a significant impact on their clients, but due to uncertainty surrounding the scope of their duty to clients and the possibility of compliance issues for addressing taxes, they ignore or gloss over the topic. In a new Covisum white paper, “The Elephant and the Snowball: How Advisors Can and Should Talk Taxes with Clients,” Elsasser explains the complicated interactions of the current tax system and argues that advisors who don’t explore these interactions could fail to act in the best interest of their clients.

"Regardless of the Department of Labor's fiduciary rule changes, we've always believed that advisors should act in the best interest of clients," Elsasser said. “Doing so means looking at all pieces of a retirement plan, including the potential for snowballing taxes during retirement planning.”

About Covisum
Covisum provides financial advisors with software, training and support to deliver retirement income plans that improve the lives of clients by facilitating better retirement decisions. As the name represents — “co” means joint or shared, and “visum” means vision — Covisum helps advisors and their clients create a shared vision of the future. For more information, visit

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Katie Godbout
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