Does anyone do this? IRA selling

[nycCPA]

Does anyone with a tax practice sell any sort of financial products. What I was thinking about specifically is often I inform people about IRA's and the benefits they offer, etc..I figured if you took the Series 6, you could then offer to setup these IRA's through an independent broker-dealer on behalf of your clients.

Was just wondering if anyone does this and if it is worth the time and effort economically.

[Roberts]

I do it but I started as a broker and offer tax prep as a service for my fee based clients. In 1999 I lost two clients on a whim because I wasn't selling high tech stocks during the peak. Learned that if I had locked in their tax prep and made moving a little more difficult, they would stay with me through those whims. It's worked out amazingly well as I've yet to lose a client who utilizes both services. Plus, they feel a much larger connections if you are meeting their needs in several different areas.

The cross selling does work but it depends on your client class, how wealthy they are and how you have been presenting yourself in the process. If you are the cheap tax prep alternative, this is not going to work. If you are doing full service work and attracting more complicated returns, it will be much more likely to work.

The investment arena is getting away from selling products and small accounts. It is better to offer a process to meet their needs. You may find that your existing tax clients don't see you in that way and will never accept you as an investment professional.

[ChEAr$]

Do what you do best

and if that is tax work, do that and not dabble in another business.

IMO, it's a conflict of interest. IF I were "selling" an IRA to a client, and knew that
he could get a higher rate of return with no load mutual funds (which he can of course)
how could I with a straight face "sell" him an IRA on which I got a commission?

[LawrenceGR]

Would

it be illegal to process paperwork for someone into a no-load fund? I have often thought this might be something I could offer some of my clients to help them setup an IRA. To be more clear, I would just help them fill out the forms for say Vanguard of something like that. The one thing I fear is, if their IRA goes down in value I'll be a no good so and so. I always try to tell people that the stock market moves in two directions.

[geekgirldany]

If I could just hook up with someone locally to recommend clients to that would help me.

[AZ-Tax]

Marketing financial products...

I think it’s a gray area of whether or not marketing financial products is a conflict of interest for tax preparers. FDIC banks selling non FDIC products is a conflict of interest not to mention misleading but they have been doing it for years. I was a securities rep and insurance agent before preparing taxes and I must tell you, tax preparation to me is like an X-Ray to a MD. Now I can understand my clients situations like never before. Basically I use my securities license to become rep on those accts my clients desire me to be and I market some individual bonds. Very little mutual funds and virtually no individual stocks. I market mostly traditional fixed annuities especially for IRA’s. So I see myself as pretty conservative. It wasn’t until I became a tax preparer that I understood how most tax preparers see most securities reps as blank blank especially when it comes time to deal with them regarding a tax client. Being one myself helps me deal with them. Another reason to consider marketing securities and insurance, its seems more and more tax preparers are marketing these products and if not, they are teaming up with securities and insurance agents. The supplemental income helps me be more selective with my tax clients.

[Roberts]

it be illegal to process paperwork for someone into a no-load fund? .

Would you be doing this for free? If you charge them for tax prep, FINRA will claim that you are in effect charging them so it would be illegal.

And for the other, I don't see how in the world it is unethical to charge someone for financial advice. I know of groups who do tax prep for free so is it unethical to charge someone to prepare their tax returns now?

[JohnH]

I don't sell investment products because I personally see it as an insurmountable conflict of interest, but I do give investment advice to clients who ask for it. My advice is always the same - go to the Vanguard site and read everything they can find written by John Bogle. Don't make any investment decisions until they have a good handle on what he says. It might take 6 months or more to get there, but if they will apply themselves and learn 10% of what he advises, they will be able to manage their investment matters just fine without any help from me or anyone else.

If they are not willing to do that, then they need to accept the fact that they are babes in the woods when it comes to investing (or sheep ready for slaughter - choose your analogy). They are rolling the dice when they select an investment advisor. If they get lucky and choose a good one (or a lucky one), that's fine. If they choose a loser or a crook and wind up getting fleeced, that's the price one pays for willful ignorance. But at least they willl be doing it with their eyes wide open.

[veritas]

Here is an example of what happens

when a client or an investment advisor who doesn't know what they are doing.

I the tax preparer advise a client to convert 10s of thousands of dollars from a traditional IRA to a Roth IRA in 2007. The reason I advised the client to do this was because he would have ZERO tax liability on the conversion since he had substantial losses.

Here is what the poor client and knucklehead advisor did. They distributed the money from a traditional IRA with a fund family to another fund family directly to a Roth IRA. In 2007 this was not an available option. So we had to recharaterize the distribution. The end resut is my client is going to pay thousands of dollars in tax needlessly.

Go ahead and send your clients to Diamond Jim's Investment Company or Vanguard. You are not doing them any favors.

[veritas]

I have attached a link to a local paper

This guy took money from some of my clients. They didn't want to listen to me. I would have invested their money in a good mutual fund family and they would still have it today.

http://www.portlandtribune.com/news/story.php?story_id=120907333757394000

[JohnH]

Just a clarification.
I don't tell them to got to Vanguard and buy something.
I tell them to go to Vanguard and absorb the wisdom of John Bogle. Once they do that, they are ready to buy something (which will usually be the Total Stock Market Index Fund for the equity portion of their portfolio). For most people this process will take months, during which time their money is better off sitting in a Fderally Insured CD until they are truly ready to do something with it. But they can't even do that until they learn all about asset allocation in order to know how to rationally decide how much to allocate to equities in the first place. They will also learn why 90% of all mutual funds are dead bang losers beginning the day they purchase them, and why expenses & fees suck all the real value out of the funds that do happen to make money.

[Roberts]

Wow. 90% of mutual funds are losers. I don't offer medical advice. I suggest you not offer any investment advice.

[JohnH]

Yes, I did leave out a few details with that comment, didn't I? My point is that a mutual fund can make money and still be a loser - big time. All it needs to do is soak its sharholders with fees to sap away their earnings, or easier still it can simply fail to beat the broadest market index. Based on those two standards the actual figure is 92% of all mutual funds are losers. The achilles heel of all actively managed funds is "performance persistence" and the cold realities of regression to the mean eventually catch up with the hype, no matter how often it is repeated.

I won't offer financial advice. I'll do something even better. I'll post a link to a recent speech by John Bogle, who knows infinitely more about the subject than anyone I'm aware of, and who always speaks with common sense on the subject. I wish I knew a fraction of what this man knows about the subject.

http://www.vanguard.com/bogle_site/sp20070220.htm

[sea-tax]

Wow I am not even sure where to start with some of the comments and ideas I have read here.
I guess I will start with Vanguard, wonderful tell the client to go to VG and buy a no-load low cost index S&P 500 and you can then trick the client into thinking they have gotten the equal return of the index. Unfortunately they will pay a expense ratio and actually get the S&P return less expenses, so basically they are settling for a C-, when in actuality they can pay a little more and have some professional advice and get a fund that is in the B to A range which more often than not will outpace the benchmark.

Conflict of interest- This one I am not really sure how to respond to other than to say I disagree. Who better positioned to offer these services than a person who is knowledgeable in both tax and finance as all financial decisions have a tax ramification associated with them. Infact this is my one gripe about the big brokers, they very rarely consider the tax ramifications of the action they solely look at the finance side. The fact is that taxes can make what on the outset looks like a good decision, be a really poor one.


It is hard to count how many times on this board we have had to answer questions for some tax preparer about how to fix some stupid mistake the client or there broker made , like putting money into a ROTH instead of a IRA. My clients that use me for both tax and investing never have these problems, and they are better off for it.

[JohnH]

I'd say if someone goes to Vanguard and buys without doing their homework, their first mistake would be to buy an S&P 500 Index fund, since they have would have paased up the opportunity to buy the Total Stock Market Index instead With the TSMI they get a guaranteed return of the entire US stock market minus a very tiny expense ratio - a pittance compared to what they will pay with any managed fund.

Since this is the gold standard against which all managed funds must compete, and since virtually all of them lose out at some point against the standard, the investor must accept the fact that if they buy anything else they are rolling the dice, and the dice are stacked against them.

I'm sure you do a fine job for your clients, but for every one of you there are thousands of financial advisors out there who don't have a clue, and neither do their clients.