The Seven Deadly Sins of Year-End Financial Planning

2. Missing RMDs.

This is an issue of neglect, or assuming your client will remember even if you do not prompt them. If they have reached their required beginning date, they must take a required minimum distribution each year by Dec. 31 or face a penalty.

Danger: Your client (with or without your help) realizes in the last week of the year this must be done, so there is a race to meet the deadline. Worse, they were on vacation, realize in January 2024 that it was not done, they are subject to penalties, and they blame you.

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3. Neglecting the annual gift tax exclusion.

Individuals can gift $17,000 and couples $34,000 in 2023. And that's per recipient: Your client can repeat this generous act for as many people as they like, without incurring the gift tax. This can be useful for wealthy older clients seeking to reduce the value of their taxable estate. .

Danger: Your older single client might feel they missed an opportunity. The younger family members, aka “the heirs,” might think you dropped the ball on them getting a windfall Christmas present.

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4. Assuming clients will remember tax loss selling.

Profits aren’t realized until a sale is done. Unfortunately, taxes come along with capital gains. Your client might want to nail down some profits. Tax loss selling of other securities can help shelter these gains. Someone needs to keep an eye on the numbers.

Danger: If you let the year close without addressing tax loss selling, your client might discover their good results in trading landed them with a tax bill. If they pick up on this before the end of the year, it could be a rushed situation between the holidays. Do it now when there is still plenty of time.

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5. Not scheduling portfolio reviews in advance.

Everyone gets busy in the fall. Your client has numbers they need to hit at work. It may be hard to get their attention. Continue offering periodic portfolio reviews. Make an extra effort to get an annual review on the calendar for early January. How far in advance does your doctor book appointments?

Danger: The start of a new year inspires us to make changes. Someone else might be prospecting your best client. Do you want them to pass judgment on how well your client did following your advice? Taking the initiative allows you to report those results first.

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6. Assuming clients are too busy to talk.

Fall brings the return to school, Halloween and Thanksgiving. The tidal wave of Christmas marketing has already started. Ditto the football season. You are busy. Your clients are busy. You don’t want to compete for their attention. They will call if they have questions, right?

Danger: The client who does not hear from you might assume they are neglected. Another advisor might start their prospecting approach with: When was the last time you heard from your advisor?” Make the effort, even if they say they are too busy.

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7. Not anticipating their year-end bonus.

A third of U.S. companies offer year-end bonuses. Many of your clients probably fit into this category. If you do not make the case to “put it to work,” your client might have other plans.

Danger: You expected this cash would come in your direction for investment. If you wait until they receive it, you may discover it has already gone. It might have been spent on a vacation, a new pool or as the starting investment with another advisor.

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