Tax Drag: Are Your Clients Being Held Back On Their Investment Journey?

Is tax drag holding your clients back? More likely, how much is tax drag holding your clients back?

Investing can come with a hidden cost—and that cost is taxes. How much are taxes costing your clients? If you are a tax-smart advisor, you probably already know the answer to that question. But if you aren’t taking steps to reduce the impact of taxes on your client portfolios, then the cost is likely a lot more than you think. And that cost can have a long-term impact on something that is near and dear to your clients: their retirement savings and their ability to enjoy the years after they leave the workforce.

Run fast, or run slow?

How is it that taxes have that impact? It comes down to the drag on performance they represent. Think about an activity such as running. My friend Mark in the picture above is a runner. He prepares for a run by warming up, wears athletic clothes to prevent restriction of motion, uses specific running shoes to both protect his feet and legs and assist in the motion. But what if, after all of that, someone tied a rock to him?