The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
Many high net work doctor and dentist clients believe they have a handle on their tax planning and efficiency, with help from CPAs and other professionals, but they don’t realize just how they’re not really taking advantage of their tax potential. Having the right team behind your tax efficiency when it comes to your investments will show you where you can be saving, where you can find incentives, and the wisest way to approach your investments from a tax perspective. Once clients see the potential they have, they begin to understand just how they’ve been underperforming on their tax planning before.
Richard Wilson: My next question is for clients who have been with your group for a while, and are educated on tax efficiency as well as why they should be conservative sometimes but they also may be a little bit growth oriented, how do you see that ranking for someone who’s maybe new to working with medical high net worth doctors, dentists, for the informed dentist/doctor who’s not on their first investment as an LP or their first real estate syndicated investment, are they typically saying “Wow, I really need tax efficiency, and most people aren’t giving me that.” Is that ranked number one above, and then growth and conservative kind of fight each other for another spot or how would that ranking go in your mind?
Dr. Forrest Bryant: One of the, sometimes we talk about a gap in the marketplace, one of the gaps in the marketplace for doctors is tax efficiency. So, very common we have new clients come in and they go “Oh yeah, I’ve got a CPA. We’ve been doing tax planning I’ve been doing that for 20 years.” And then we look, we do their tax review and they’ve had no tax planning and they’re paying just an exorbitant amount in taxes. So, you know, a lot of them think that tax planning is for their CPA to say “Okay, well you’re going to make your quarterly tax payments, and then on April 15th you’ve got to write another big check for this.” And that’s tax planning.
One of the things that we do have some really awesome CPAs that we work with who understand real estate, who understand operating businesses, understand the tax law, and so tax efficiency and understanding the tax code and what the government is telling you what they want you to do is just so critical. If they’re going to give you tax incentives to invest into energy, solar, natural gas, oil, if they tell you that they want you to do those things and they’re going to give you some tax benefits, then why don’t we do those things? And pay attention and find really good sponsors in that space. So, one of the things that we really try to do that most new clients don’t understand is matching up the investment type with the cash type. And so what I mean by that is you match up your cash and your taxable savings with tax efficient investments and then you look at your qualified money, if you’re looking at your tax deferred bucket and your Roth Bucket. And so there’s certain types of investments that you should do over there that you don’t do with your cash, and vice versa. And so most clients, new clients, don’t understand that, most advisors don’t understand that, and so there’s just a big knowledge gap there for not only new clients coming in but also other advisors out there that just really don’t comprehend that in the way that we do it. So we feel like that’s one of the biggest advantages when we’re really hitting on all cylinders where clients start understanding tax efficient investing and they’re also looking at tax strategies with tax deferred money and Roth money and really starting to see things come to fruition and understanding that is really worth it.
So one of the ways that we track client growth is different than probably anybody else. We look at annual net worth growth. And so most people don’t look at that because they don’t have access, the type of access that we do to our clients, but we have some clients that have had some significant net worth growth and sometimes they’re shocked like how did that happen in a year? And it’s, you know, it’s kind of having this comprehensive system and doing the right things, in the right buckets, at the right times and we can start having massive, massive results.
Richard: Right, great.
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