Ep. 137: Scalable Tax Planning for Advisors with Kevin Lozer, Holistiplan

Come on in, sit back and relax, you’re listening to episode 137 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting, and this podcast features interviews, news, and analysis on the trends and best practices all around wealth management technology. Our theme for this month is startups, we went through the Kitces AdvisorTech Map and selected a few category newcomers we thought would be the most interesting to speak to. Today’s guest is Kevin Lozer, Co-Founder of Holistiplan.
In this episode we learn that Holistiplan is up to 3,000 clients, RIAs, broker dealers and insurance companies, they’ve built out more educational content to help advisors understand their report output, and the software also has developed a number of optimizers including one for Roth RIA conversions as well as charitable giving to identify a range of recommended values for advisors to review.
The way data is delivered and consumed in the wealth management industry has changed dramatically over the years. These changes have made it more difficult for enterprise wealth management firms to maintain their data infrastructures. Over time, they have deteriorated and have been duplicated and made obsolete through multiple acquisitions, until no one in the organization is quite sure how all the data pieces fit together.
That’s why Ezra Group launched our Data Assessment Service to conduct in an depth review of data sources, downstream consumers, data utilization analysis for enterprise wealth management firms and deliver a comprehensive strategy and roadmap to get your data architecture under control. For more information on Ezra Group’s Data Assessment Service go to ezragroupllc.com
Be sure to check out our sponsor, the Invest in Others charitable foundation at InvestinOthers.org.

Topics Mentioned

  • Product History
  • Holistiplan Use Cases
  • How Enterprise Firms Can Leverage Holistiplan
  • Helping Advisors Optimize
  • Implementation Tips
  • Avoiding Conflicts with CPAs
  • Roth Conversion Recommendations

Episode Transcript

Craig: I’d like to introduce today’s guest, it is Kevin Lozer, Co-Founder and President of Holistiplan. Hey Kevin, welcome to the program.

Kevin: Thank you Craig, I appreciate it. It’s nice to see you again.

Craig: It’s been awhile, you were on the podcast last year.

Kevin: I was right, about this time. Springtime of 2021. I’m happy to come back, thank you very much for the invite to come back and talk a little bit more about what we’ve been doing.

Craig: Yes, we’re interested, I follow you guys closely as we do a with a lot of wealthtech firms. We’re always interesting in seeing what you guys are doing, and this month we are talking about startups. So you’re technically still a startup, you’re not there yet, so we’re excited to hear what’s been going on. So for people who are not familiar, can you give us the 30-second elevator pitch for Holistiplan?

Kevin: Sure. We are tax planning software for advisors, created in 2019, we allow advisors to do tax planning far more efficiently, scale it across their entire organization. It starts with uploading a client’s entire tax return, we are removing a bunch of the data entry that was previously required to do tax planning. You upload the client’s tax return and we produce analytics and a nice clean client deliverable with the advisor’s logo and disclaimer on it so they can provide a report and client deliverable to their clients.

Product History

Craig: So how did you come up with this idea? Was it, scratching your own itch from your firm or did someone say hey, it’d be really great if you had this? What was the impetus for this product?financial advisors and tax returns

Kevin: It was scratching my own itch. My co founder and partner Roger Pines’ itch, and a lot of our peers as well. So Roger and I are both advisors by background. I spent more than a decade as an advisor I actually still am a advisor. I have a handful of clients that I still serve in my own small very small solo RIA. So it started as something we identified as a need in our respective firms, Roger’s and mine, and we knew our peers in the industry, but were doing tax planning, but it wasn’t a scalable deliverable for clients. And in my personal case, my firm, we had several hundred clients, we weren’t able to reach all of our clients and I was using a combination of Excel spreadsheets and Word templates and then an email out to the client. So it was something that we identified again, that’s how it started as the need in the industry. And then as we grew, as we brought in advisors using the software, we crowd sourced a lot of the great ideas that we ended up implementing and coding into the software.

Craig: That’s a great story. I love those kind of, hey, we had this great idea. We need to do it for ourselves and it just started expanded to something. It’s very hard to do that because advisors don’t always make good business owners so great that you guys got over that hump had figured out how to build a successful business, software business.

Kevin: Yeah, that was definitely part of the learning curve for us, though, for sure moving from out of running an advisory practice to SaaS company. Definitely that’s it’s been fun. And a great learning experience. And it’s been a great ride thus far, we think it’s going to be great going forward too.

Holistiplan Use Cases

Craig: I think so from what I know about you guys. So let’s share with people who are listening about different use cases why what kind of firms use Holistiplan, and why do they use it?

Kevin: We now have well over 3000 firms of all sizes whether it’s RIAs broker dealers, insurance focused firms, all kinds of firms using the software, I’ll break it down into into three different types that that are leveraging it the best. One are large firms, enterprises, soon to be very large enterprises. They’re using it to provide tax planning consistently across their entire organization. Back to my earlier point about even within my relatively small several hundred client RIA that I was helping run last decade, we couldn’t even touch all our clients. So imagine firms that have tens of thousands of clients and hundreds, if not thousands of advisors serving them. To date, a lot of times those those enterprises are not providing a consistent deliverable across every single one of those hundreds or thousands of advisors. When it comes to tax planning, they certainly weren’t in most cases.

Kevin: So Holistiplan offers them an opportunity to scale tax plan, to deliver that service across all of their advisors in a very fast, efficient way. And again, consistent way so every one of their clients now are getting the same type of deliverable with the same formatting, the same types of opportunities being identified and analytics being provided, all with a few clicks of a button. So that’s how large firms are leveraging it the most. And then the smaller midsize firms I kind of break those down into two categories, and this even goes down to solo advisors, right? So firms that have been doing tax planning in the past like I was in like Roger’s firm was and many of our peers were, but doing it manually with Excel spreadsheets or Word document templates. And emails and having to read through a 1040 tax return document themselves and try to find opportunities themselves by reading through the document. That takes education and that takes a lot of time. We streamline that, we’re doing that work. The software is doing that work for the advisors. So if you’re an advisor that is doing tax planning today, this makes it so much more scalable and efficient for you.

Kevin: Then where we’re seeing a lot of our growth now, as we add advisory firms is the advisory firms that weren’t doing tax planning at all, because they knew it wasn’t scalable without software. They didn’t maybe have the time and energy to go through the educational requirements to understand how to read through a 1040 or do forward looking projections., and do that level of tax planning. Holistiplan gives them off the shelf opportunities to start implementing that for their clients and start providing that service for their clients and it’s new enough that it is still very much a differentiator for advisors as investment portfolios and managing those become more scalable with software and advisors looking for opportunities not to talk about the markets all the time, tax planning is probably the second thing on the list of clients wanting to learn, wanting to know if they’re in it doing everything they need to do from a tax standpoint, next to investments, that’s number two, in most cases. This gives those advisors that that haven’t been able to answer that question for their clients or basically said, you want to talk to your CPA or tax preparer about that, I don’t touch taxes. It gives them the opportunity to do tax planning for those clients and set themselves apart from the advisor down the street.

How Enterprise Firms Can Leverage Holistiplan

Craig: Let’s roll back to enterprise. So what is it about the way they’re doing it now that’s inconsistent? Can’t they just build a process that says do that do things this way? What is it about Holistiplan that is enabling the enterprise firm to really deliver consistently and what other types of enterprise features are you offering them that give them the ability to look across many advisors, across branches are held with how the tax recommendations are coming out of the software?

Kevin: So they can certainly try to train their hundreds of advisors to try to do it. What we have seen is that most enterprises are just now starting to get focused on on providing a very consistent deliverable across their entire organization. A lot of these enterprises grew through acquisitions, buying solo organizations, enterprise organizations across the country, and allowing or suggesting that those advisors can continue to do things the way they’ve done it before and a lot of advisors, to my earlier point, were not doing tax planning. So they’ve got pockets of advisors that are doing really good tax planning, a whole bunch of advisors that aren’t doing tax planning all under one brand, though.

Kevin: Holistiplan allows them the opportunity to, again, partly because of our technology that allows you to just simply upload the prior year’s tax return and get a client deliverable. There’s no data entry. There’s no analytics being done by the advisor, you don’t have to spend tons of time training the advisor on how to read through a 1040 tax return, the software is doing that for them. So far easier to leverage technology that already exists like ours, and use that leverage that technology to actually train the advisors and their support team who maybe have never done tax planning before, use Holistiplan to train them on the types of opportunities you can identify from reviewing someone’s tax return.

Helping Advisors Optimize

Craig: So is there a training module? How does Holistiplan train people?

Kevin: So we do have videos and and tutorials that folks can use that are subscribed to Holistiplan to walk them through how to use the software. It’s a great question, it’s actually one of the things we’re focused on in 2022 and beyond. That’s one of two things that we’re working hard on for the future. One of those is the education and training piece. Some of the feedback we’ve heard from our subscribers and prospects is that the software is great. The software’s incredibly intuitive, again, because you’re starting with that PDF document, you don’t have to figure out where to type a whole bunch of data into the system to use it. So people are up and running in the software in 5-10 minutes. It’s really easy to use and get going on it.

Kevin: But we have been hearing that software’s really intuitive, but I don’t know exactly what these numbers were telling me. I don’t know how to relay this very clean report that summarizes a tax return, a 50 page tax return, into two pages. It’s a great deliverable, but I don’t know exactly how to explain it to my client. We didn’t focus on that in the first year or two because Roger and I and the team we were building came from that advisory background where we knew how to explain that report. So it’s only now that we’re recognizing as we grow and scale Holistiplan, that advisors need a little bit more hand holding on how to take those deliverables that we’re producing, and turn them into a conversation with clients.

Craig: That’s an excellent point because just like you mentioned, some advisors are good at tax planning and some aren’t. Some advisors are good at communicating with clients and some aren’t. Right?

Kevin: Right. So that’s actually the second thing that we’re focused on, I mentioned one is the education piece. The second piece is deliverables. So expanding both within the tax planning world, but also considering outside the tax planning world, creating more deliverables that make that advisors job easier to communicate to the client and provide that. That again, that nice summary, telling the client what they need to know and what they want to know without having to go through tons of documents to do so.

Craig: Yeah, because advisors are busy. They don’t have time. So the more you can summarize it and give them here’s what you need to say, here’s the outcome. It just walks them through it. And again, improves consistency because now everyone’s got the same message and makes it easier to deliver that advice.

Kevin: That’s right. And the more consistent we can make across the entire industry, the more we turn the turn that tend to, well, I guess there’s a debate about whether it’s a profession some people feel like we’re not quite there yet as a profession, others feel like we are there. But I think part of what turns it into a profession is more consistency about how everything is delivered to the end consumer.

Implementation Tips

Craig: When you’re talking about the difference between how an enterprise like a broker dealer would implement and run Holistiplan versus an RIA, even a large RIA how would that differ?

Kevin: How would it differ between a broker dealer and an RIA or how does it differ between large firms and small firms?

Craig: Large firm or small firms.

Kevin: Large firms are going to have a capability again, because they’re large, they’ve got hundreds of advisors and they’re concerned, potentially, at least their compliance teams are and their legal teams are, of how advice is being delivered to the end client. Holistiplan gives those enterprises the opportunity to be able to see everything that’s being uploaded to Holistiplan from a tax return standpoint, be able to see all of the reports at the advisor level, at the office level, at the regional level, be able to do reporting on who’s using the software well, who’s not using the software very much. So if they’re focused on again, trying to deliver that consistent brand tax planning across their entire organization, they can use the Holistiplan internal reporting to see, hey, our offices in Arizona and California and New York aren’t using this very much, we need to get them using the software, but it looks like our team in Philadelphia or DC is doing a great job of doing it. Let’s get them to train the others. So basically, they can ue software to provide that consistent delivery, but also identify the folks that maybe aren’t doing it up to what they want from a branding perspective.

Craig: And there’s not that much to do with the software, you’re really just uploading the PDF of the tax returns and the software’s kind of running it. Are there switches and dials and knobs that you can turn virtual to change the way the software analyzes the tax returns?

Kevin: There isn’t, we’re doing all the analysis, so yes. There are ways you can customize the report, so once you’ve uploaded that return and you get that client deliverable that Tax Summary Report, you’re able to customize it by by clicking a few buttons and changing some dials, like you suggested. But yeah, so at that point, there is very, very little work that the advisors needing to do. If for the advisors and for the firms that want to dig deeper and start taking that next step in tax planning, which is okay, I’ve looked back at last year and identified some planning opportunities, but now I want to potentially quantify those opportunities or do some scenario planning and run three different options for a client. We make that a lot easier too because again, we’ve pulled in all that data from the prior year tax return, that’s your starting point as an advisor, still haven’t entered any data, right? And now all I need to do is copy that data over to to another column with a couple clicks of the button. And now I can play around with those numbers to do 2022 tax planning and 2023 tax planning maybe it’s a multi year strategy that I’m looking at.

Kevin: So to the tax report deliverable very little work the advisor’s doing some setup work 5 minutes, 10 minutes, that’s it. If you’re doing some forward looking projections, that’s where the advisors starting to do a little work as far as understanding what numbers are going to change, our filing status is going to change for the next couple of years. What’s changing in the clients life that I need to change the numbers for so that I can create a accurate tax liability for the scenario that I’m building for 2022 or beyond.

Craig: The advisor can put in information such as the client is planning to get married next year or the clients plan to have a child next year or maybe they know how many children want to have. One this year and one two years from now. You can put that into the system.

Kevin: You can, yes, so pretty much any life changes that are happening for for the clients, maybe they’re retiring, maybe they’re turning 65 so they get an extra deduction. Maybe they’re starting a business, maybe they’re selling a business. All those things would be different outcomes than the prior year. If I’m selling a business in 2022, that’s going to make my 2022 tax year far different than my 2021 tax year.

Kevin: The advisor can go in and make those assumptions again by just changing the number that’s already there that we’ve already brought in from the prior tax return. So it gives them the format that they need to go ahead and just make those changes again, making it far faster and easier than using Excel or some of the other tax planning softwares that have been kind of legacy software that some advisors have been using. Makes it far easier to do but yes, you can change pretty much whatever you want that we’re pulling in from the tax return for those forward looking years and do some really robust planning, tax planning for the advisor or for the client.

Avoiding Conflicts with CPAs

Craig: That is fantastic. So let’s move on from use cases and talk about some other best practices. Now one thing we were talking about was obviously each client most likely has a CPA who does their taxes so your software is now giving advice on the taxes How do you avoid any kind of conflict there?

Kevin: That was one of the big questions we got frequently in the beginning and we still get our sales team still gets the question of, is this tax advice or hHow is this not stepping on the toes of my clients tax preparer? Though I could from personal experience in seeing lots of advisory firms use it, it’s actually you can leverage Holistiplan to build the relationship with that center of influence, the CPAs in your community, because it’s not stepping on the toes of the CPA if done the right way.

Kevin: Tax preparers traditionally, they’re so swamped, they’re so busy, and their business model is geared almost entirely around, at least most of them, almost entirely around tax preparation. Looking backwards and basically making sure they do the tax return correctly so that they don’t get their client in trouble with the IRS, and trying to see okay, what did we do last year and are there any things that would reduce taxes potentially for that year? Most tax preparers and CPAs aren’t not looking forward, because again, they’re not typically getting paid for that and their business model isn’t created in a way to do that.

Kevin: Some charge hourly, but then the clients paying separately for that to look forward. So that’s where I’ve always believed even back before Holistiplan, that’s where the advisor steps in, the advisor can look forward. The advisor also knows what the plans are, what the goals are for the client, more so than the CPAs again, because they don’t typically have that type of relationship with the CPA. It’s more about tax preparation for last year. But their advisor relationship is more about how do we plan for the future. So the advisor can step in at that point and say, Hey, I reviewed the tax return from last year, but because I know you’re retiring in two years or three years or because I know you’re going to sell your business in two years or because I know that you want to do more charitable giving this year, again that the CPA probably does not know yet because again, you don’t have that type of relationship with them. That’s where the advisor can say, Okay, I know these plans, let’s model what that looks like. And then, if you’ve got a good relationship with the CPA, let’s show this to your CPA or tax preparer and get them in the boat with us. And that’s instead of stepping on the toes what we have found and what I found in my own practice is the CPAs love that. Basically you’re doing the the forward looking projections for them, they’re not spending the time to do that. And but they get to buy in on the strategy and provide their feedback on that strategy as well whether it’s a Roth conversion, which honestly that’s a Roth conversion, you’re choosing to pay tax today to try to save taxes in the future, right. Naturally, the CPAs are geared towards not wanting to choose to pay taxes in a given year for future benefit. But you can have that conversation with them, show them the benefits of it. And now from a client perspective as well, now they feel like they’ve got a team. They’ve got a finance team of an advisor, financial advisor, a CPA that are working together to make sure they’re optimized.

Roth Conversion Recommendations

Craig: So is there the software give these different options? Roth conversion, do you want to do this or not? Is that built into the software or is that something they have to outside?

Kevin: So it’s built in the software so that the software first is going to identify that as a potential opportunity in the tax report in that minute or so that it takes you to upload the tax return and get that client deliverable. The client deliverables going to say hey, you should consider a Roth conversion or you should consider front loading charitable giving, all kinds of different opera observations that the software’s identifying and then the next step for the advisor is saying great, a Roth conversion looks like it might make sense, but how much of a Roth conversion should I do? And historically, what I would need to do is in Excel, basically a whole bunch of trial and error and hopefully not trigger some bad outcome from a tax standpoint, by doing too much of a Roth conversion. I would spend a bunch of time in Excel, trying to figure out what the optimal amount would be. That’s built into the software now too where you can click a button and you’re going to get a tax range calc screen that basically shows all the tax torpedoes that could arise should you do a Roth conversion amount, and it’s going to highlight for you one or several optimal Roth conversions dollar amounts based on the client’s scenario and what the advisor knows about the client’s tax situation.

Kevin: We’re basically guiding the advisor through that entire process and identifying at least one potential Roth conversion number that the advisor can use and then see what the tax liability is. They can run a couple different scenarios off of that number and then have the conversation with the client on what the client feels most comfortable doing from a tax perspective.

Craig: That’s cool. I see how that would be really helpful. The so how does it work with the charitable giving, does it say well here’s a range what we think you should give or is it we’ll put in this number or over certain number of years? How does it do that in those analytics?

Kevin: In a similar way, so again, it’s going to first identify a client’s in a tax bracket where they could consider doing charitable giving, or we’ve identified that they are doing some charitable giving, rbut there’s a more tax efficient way to potentially do it. So we identify that in the analytics and the tax report, and then the advisor takes that information says okay, well what happens if we do do three years of charitable giving all in this year? And this is where the advisor needs to know the client in the in the clients plan. They might know for example, that the clients going to retire in two years, and so they’re in peak earnings for two more years. That’s where you might want to create a donor advised fund and front load your charitable giving for the next 10 years. Do it all in the next year or two while you’re still working and in a high tax bracket. The advisor can run those numbers just by copying over prior numbers and changing a few numbers using that range calc button that I mentioned earlier to see what happens if we do X, Y and Z and what’s the potential tax liability over the next few years for the client.

Craig: Alright, so we are running out of time. So I have a couple other questions I want to ask. So the software what it’s doing its analytics is it sort of like a Monte Carlo simulation where it’s running thousands of scenarios to come up with the optimization? How does it come up with those? How does it optimize the numbers in these different scenarios?

Kevin: Well, so as far as the observations that we’re identifying in the tax report, what the software is doing is running that tax return that has been uploaded through a very, very robust tax return review checklist. So I started with what Roger and I were doing in our respective firms, expanded out to our peers and beta testers of what they were doing in their firms. So those are more like algorithms that are identifying potential planning opportunities that advisors could do if they were trained in how to read a 1040 and had the time to do it. The software is doing that piece.

Kevin: As far as how we’re doing the quantification of what’s the ideal Roth conversion number or how much of a donor advised fund to contribute to those types of things, in essence, our our range calc screen is calculating the tax liability at every $100 or $500 increment. So if you increase income by $500, through a Roth conversion, what’s the tax liability and it can go out to $250,000, $300,000 of increased income in that year. It can also go backwards too though so it can say well, what if I had $50,000 more of deductions this year? What would happen? How much lower could I make my tech what bracket would I be in in that case? What would be my marginal rate in that case versus what it is today? So it allows the advisor to go both forward and backwards with that range calc screen to identify all those tax torpedoes that are hidden in our tax code that can really come up and bite an advisor or a client if they go too far in either direction.

Craig: Great, thanks. That was really helpful to understand that. Does your optimizer give better results if the advisor uploads more prior years of tax returns? Or is it just the previous ones all you really need?

Kevin: Previous one is all you really need. But we do see that advisors are uploading multiple years to be able to show trends in our scenario analysis screen, so be able to show the client, this is what 2020 looked like, this is what 2021 looked like, this is what I’m proposing we do for 2022 and 2023. So it gives you those multi year trend analysis and seeing how things are changing how life’s changed and how those life changes have impacted a client’s tax situation.

Kevin: So all you need to get started is one year’s tax return. It doesn’t even have to be the most current years that we see advisors that are you know, still occasionally getting started by uploading a 2019 return to do 2022 analysis. At least while there might have been a bunch of things that changed between 2019 and now they can still upload the tax return to get started. It populates all the data for them, provides the the observations the analytics of what should be considered. And it gives them that starting point to now do 2022 analysis without having to start by entering in 50 to 100 pieces, pieces of data into a spreadsheet or a tax planning software.

Craig: Right final question, what’s your biggest piece of advice for advisors who have an idea for software and want to start a software company? And you can’t say don’t do it. What’s your biggest piece of advice, your best advice?

Kevin: I think it’s great to get started with what you’ve been doing in your firm and business. But I guess but my biggest piece of advice and where I feel like in part led to our success and how we grew so quickly, is we weren’t afraid to put ourselves and our software out there to our peers, and even some folks that we didn’t know, to get feedback and advice. Because this industry, this profession is very fragmented. Hundreds of thousands of advisors represent hundreds of thousands of advisory firms. It seems. Lots of people have different ways to do things. The more feedback you can get early on, of how other people are doing things from a financial planning or tax plan or whatever it is, their jobs better, I think you’re better suited to provide a software that then everybody is going to enjoy and appreciate versus maybe just how you did it in your firm.

Craig: Okay, advisors, you’ve heard it here first. Now you know the rest of the story when you’re looking to start your own software company. So alright, so we’re out of time. Kevin, tell everyone where they can find more information about Holistiplan.

Kevin: Holistiplan.com has tutorials videos of how you can use the software. It should click buttons button to start a seven day free trial. So everybody gets to start and they get to upload three returns for free and see what the software does. That’s one of the things that we’ve been adamant about from the very beginning is giving advisors the opportunity to see it with their actual clients. To see if it’s a fit for how they provide tax planning to clients. So really easy to get started Holistiplan.com or if you have questions, info@Holistiplan.com we’ll get you connected to one of our sales executives and you can do a one on one demo as well.

Craig: Excellent. Kevin, thanks so much for being on the program.

Kevin: Thank you, Craig. I enjoyed it.



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com