As the holidays approach and another calendar year draws to a close, it’s time to evaluate the performance of your clients’ investments and overall financial plans. Did they have a good year, or a bad one? More importantly, how do they feel about where they are financially? The upcoming month of December can often be a slow one for many investment and financial professionals; use this time to strengthen your relationships with your clients with a comprehensive year-end review. This article will briefly examine some of the major issues that should be addressed in a financial review and how they can benefit your clients.

Issues to Examine

As the term implies, a comprehensive financial review will cover your clients’ complete investment, insurance, tax, education, retirement and estate plans along with how each category impacts the others. Each of these categories may call attention to issues that need to be resolved with some sort of action before year-end. Whether they’re young and starting out or nearing their retirement years. thorough attention to each segment of your clients’ plans can yield substantial benefits for your clients — and for your business.

Tax Issues

A great many of the possible changes that may need to be made will involve income taxes. Your clients’ taxable income, gains and losses should be closely examined to determine what, if any, action should be taken in order to reduce their tax bills. Is a client hoping to itemize his or her deductions on a 1040. If so, are there charitable or other miscellaneous deductions that can be taken this year to get this person over the threshold?

Example — Increasing Itemized Deductions

Mutual funds are another area that may need consideration. Most mutual funds post their annual capital gains tax distributions in December, and then reduce their share prices by the amount distributed. This means that clients who are considering selling one or more of their funds should do so before the gains are distributed, and should also wait to buy a given fund until after the distribution is made.

For clients who invest in municipal bonds. capital losses can be realized through tax-free municipal bond swaps. where a bond that is trading at a discount in the secondary market is sold and a similar bond is purchased to replace it. The same strategy can also be applied to stocks; if an individual stock is posting a loss for the year, it can be sold and replaced with shares of an exchange traded fund that invests in the same sector.

Year-end bonuses can provide another opportunity for tax planning. Does the client have an immediate use for the money? If not, then perhaps a lump-sum contribution to a retirement account may be a good idea. This can either reduce taxable income in the current year or provide greater tax-free income at retirement, depending on what type of retirement account is used (i.e. Traditional vs. Roth ).

Life-Changing Events

Almost every year, a major event of some sort will occur in the lives of most families or single persons. Promotions, demotions, raises, births, deaths, retirement and college are just a few of the things that will substantially impact your clients’ financial lives. All of these issues have separate ramifications that must be evaluated and addressed. If your client’s family has grown this year, does his or her income tax withholding need to be adjusted? If your client gets a raise, how could the surplus be spent most effectively? Does the client have elderly parents with health or estate planning issues? The possibilities are too numerous to list.

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