5 conversation starters to reframe the tax discussion and deepen client engagement

No one likes the idea of paying more in taxes than they have to, so that’s why tax-efficient strategies are a powerful way to add value. And the higher your client's marginal tax rate, the more value there is in pursuing an investment strategy that factors taxes into the decision-making process.

Although some of the strategies can be abstract or confusing to clients, the real challenge is helping clients understand them in a way that feels relatable and actionable. When you reframe the tax discussion, you not only help build client confidence, but you also reinforce to clients why working with you matters.

Here are five conversation starters to help you reframe the tax conversation and uncover new planning opportunities with clients.

1. It's not just about how much investments grow, but how much clients keep

Many people focus on pretax returns without realizing how much taxes erode long-term results. And diving right into strategies like Roth conversions can leave clients feeling overwhelmed or confused. Instead, try reframing the conversation around after-tax returns. For example, the average U.S. equity mutual fund’s after-tax return is about 1.8% lower than its pretax return—a difference that can compound to significant dollars over time. That’s a powerful data point!

“It’s not just about how much your investments grow, but about how much you actually keep after taxes. Some investors can lose close to 2% in returns each year to taxes; over 20 years, that can really add up. Let’s explore ways to make your portfolio more tax-efficient so that you can keep more of what you’ve earned.”

2. Where clients save matters almost as much as how much they save

Clients often focus on how much they’re saving but overlook where those savings are held. Simplify the concept of account diversification into something clients can visualize by using the “tax bucket” analogy. By spreading assets across different tax-free, tax-deferred, and taxable accounts, clients can gain flexibility in managing taxes more effectively in retirement. 

“It’s not just about how much you save, its about where you save. Think of your money in three tax buckets: The "pay now" bucket—like a Roth IRA—where you’ve already paid taxes, and qualified withdrawals are tax-free. The "pay later" bucket—like a traditional retirement account—where you defer taxes until retirement, potentially when you’re in a lower tax bracket. The "pay as you go" bucket—a taxable account—where you pay taxes annually but have more flexibility and liquidity. By diversifying across these types of accounts, you’ll have more control over your retirement income and tax strategy. It’s not necessarily about “paying less today” but more about creating options for the future.” 

3. Don’t forget the asset location conversation

While clients may understand diversification, many probably don’t fully grasp the concept of asset location, where different types of investments are held across tax-free, tax-deferred, and taxable accounts. Disregarding this could mean paying more in taxes than necessary. Instead of diving into the technical aspects, keep it simple. Explain that placing different types of assets in different accounts can impact after-tax returns. 

“It’s not just what you invest in, it’s where you hold those investments. For example, high-growth investments often make sense in Roth accounts because growth can be tax-free. Income-generating investments like bonds may be better suited for tax-deferred accounts since you won’t pay taxes on the interest until withdrawn. And tax-efficient investments like municipal bonds may make more sense in taxable accounts. By being intentional about asset location, we can help keep more of your returns over time.” 

4. Make it personal with “what if” scenarios

Many clients assume taxes in retirement are fixed. Personalize the discussion with “what if” scenarios that highlight how different tax environments can impact retirement income. By modeling higher and lower tax rates and showing how account diversification allows for flexibility, you can demonstrate how proactive planning and tax-efficient strategies can help give your clients more control.

“Taxes in retirement aren’t a fixed number—they’re a variable you can influence. What if your tax rate is higher in retirement than you expect? What if it’s lower? What if you could decide which account to pull from depending on the tax environment at the time. Let’s run through different scenarios to see how different strategies—like Roth conversions or tax-efficient withdrawals—could impact your long-term plan.” 

5. Turn investments into a story of tax efficiency

Clients often think of investments in terms of risk and return and may not fully appreciate how taxes can shape long-term outcomes. But adding “tax efficiency” as a third lens gives you a fresh way to frame portfolio and investment reviews and reinforces your value in helping them keep more of what they earn.

“When we look at your portfolio, it’s not just about performance. It’s about what you actually keep in your pocket after taxes. That’s why we’re also looking at tax efficiency alongside performance. By making your portfolio more tax-smart, we’re helping to grow your wealth and support your long-term goals.”

Position tax efficiency as part of the full picture

By reframing the tax discussion through relatable examples and personalized strategies, you not only can help to make complex concepts easier to understand, but you can also show clients the real value of working with you. Framing tax efficiency as an important tool—and not the sole driver of decisions—reinforces the importance of balancing growth, risk, accessibility, and taxes in a cohesive plan, which ultimately helps your clients keep more of what they’ve earned while staying aligned with their long-term goals.