Mike and Ben on Tax Planning with Holistiplan (Ep. 11)

Welcome to Ideas by Mike, the podcast with Mike Milligan, where you will find one-of-a-kind financial planning advice for your one-of-a-kind life. With over 22 years of experience as a certified financial planner, Mike shares experiences and advice on crafting simple, easy-to-understand financial plans based on your values and priorities. He believes that taking a personalized approach is the best way to prepare for the future and give meaning to your finances. So follow along as Mike, and from time to time his guests, explore different strategies and tools that could help you secure your financial future in retirement. Now on to the show.

Hello and welcome to the Ideas by Mike podcast with your host, Mike Milligan. I'm Wendy McConnell. Hey there, Mike. How you doing today?

Good, Wendy. How are you?

Oh, I'm good. I see we have a guest today. This is exciting.

Yeah, I'm excited because, as you know, we've been talking about the one-of-a-kind financial planning process. And one-of-a-kind financial planning involves tax planning, retirement income planning, investment management, long-term care strategies, and finally, the legacy strategies. So, Ben Birkin from Holista Plan. The provider that we use to help do our tax strategies is here with us today. Wendy, he's the Vice President of Customer Success and Engagement for Holista Plan. So, I'm looking forward to kind of diving deep into who Holista Plan is with him and kind of educating not only our clients, but also our advisor partners on this amazing tool that we have in our toolbox.

All right. Well, welcome, Ben. Thank you for being on the show.

Thank you for having me. It's a pleasure to be here.

Ben, I think a lot of people, we always talk about history on this show a little bit, like what we talk about, like my founding story at Ideas by Mike. But I would love for everybody to know what the founding story of Holistic Plan is. Sure.

It's actually a story born out of midlife crises. As many good stories are. So the 2 founding partners of Holistic Plan, Roger Pine and Kevin Losier, actually the 3 of us with a 4th person, we'd all known each other for a very long time. We were all part of a study group together. And in 2018, 2019, Roger and Kevin both independently realized that they were not fulfilled with where they were just career-wise. Doing the things that they were doing at their respective firms. They were in places of leadership, lead advisors, doing all the stuff that, you know, you're sort of trained to do on this advisory track. But I think it reached a point where they said, I don't know if this is how I want to continue with the rest of my career. Roger had already branched out. He happens to be uniquely gifted in being both an excellent financial advisor, but also a computer programmer. So he knows coding and had done a couple of smaller projects where he thought maybe this will be what I want to do. Maybe this will be what I want to do. But when he and Kevin both realized that they wanted to branch away from financial planning as their primary career function, Kevin had the idea of using a tool that Roger had built. Holistic Plan originally was supposed to actually start with understanding insurance documents like property and casualty insurance documents using optical character recognition software, which is basically, you know, you upload a document and the software can read what's on that document and entries in different places. Put a report back out. Kevin realized that while property and casualty were interesting, there's probably more of a use case for tax. So, you know, your tax return, my tax return, Wendy's tax return, they're all laid out exactly the same. Now I'm going to assume the 2 of you have higher numbers on yours than I do, but they are all laid out exactly the same no matter where you live. So it makes it a uniquely available document. for this optical character recognition software to apply to. So they came together in 2019, built out the very first version of Holista Plan. I was still working in my advisory firm at the time, was lucky enough to see an early prototype of it. It was ugly and it didn't work, and I was already ready to pay them for the software. Like, that's how transformational you could tell it was going to be. And I think you've seen that. So the company launched in 2019, Won XYPN's new technology contest that year. And in just about 5 years or so, give or take, you know, we've gone from zero to now we have over 30,000 users on the platform, represent over 5,000 firms on the platform, which is just astronomical growth in the fintech space.

It is astronomical, right? And so to me, when you say we have, you have 30,000 users on it, That means there's a lot of tax planning going on.

Sure is.

Around the country. And I mean, that's really the, you know, when you start talking about data recognition and encrypting and coding, right? I mean, that's like beyond everybody who listens to this, right? It just means that you guys are wicked smart. That's what it means.

I mean, right? Go on. Yeah.

And so, but like, can you, like, and to me, I've seen the outcomes that, you know, report, like the custom report that comes from a list of clients provides, but can you talk about what the main benefits of somebody having a tax analysis done would be for somebody along the way?

Yeah. And I'm going to answer this in a roundabout way. So, there was this really good report that came out. You know, every year there's somebody that does some other like state of wealth management, state of financial advisory, you know, And people pay a lot of money to get those insights. The Spectrum Group did one, I think it was in 2018 or 2019, where they compared services that wealth management clients expected to receive and what they were actually receiving. And so it's a little bit dated, the numbers are a little bit different now, but in this one it was like 95% of respondents expected tax planning, 25% were getting it. So you have this huge gap in what people thought they wanted or said that they wanted and what they were actually getting. And I think some of the issue that initially comes up is, I don't know taxes, or I'm not even allowed to give tax advice, right? Because there's this big bugaboo about, you know, I can't give tax advice. It's illegal to give tax advice. To which, you know, we say like, that's not probably what you think it is, right? If you've ever told somebody that they should, use a traditional IRA versus a Roth IRA or vice versa, that they should have ever done a Roth conversion. Guess what? You're doing tax planning. You might not have known it, but you're doing tax planning. So what Holista Plan initially allowed people to do was there was this cohort of folks who were doing tax planning, and usually tax planning starts by looking at somebody's most recently completed federal tax return, right? Because how else do you know where to start? So you have all your sources of income, deductions, taxes paid, and so on and so forth. The challenge is that reviewing somebody's tax return is time-consuming. You know, manually looking at every page, coming up with your insights, coming up with a really nice, attractive, consistent client deliverable, you know, that takes some time. But as a starting point, that's probably where people should start because if you think about a tax return and the benefits of doing a tax return review, your clients, my clients, They don't understand how taxes work, right? They just don't. The tax return is not a well-constructed document in terms of telling a compelling story. There are many other books that are much more compelling than reading your tax return. And yet your CPA, my CPA, Wendy's CPA, assuming we all have people who are doing our own taxes, they'll start by sending you, a layperson, here's your tax return, tell me if anything looks wrong. Well, how are you supposed to answer that, right? As somebody who doesn't understand taxes. So just, Informing your clients how their taxes got calculated and what all these things mean is a huge value add. I'll throw in something else. One of the most important pieces of tax planning, just broadly speaking, is knowing what somebody's marginal tax bracket is, right? The rate of tax that they pay on the last dollar that comes in the door. Guess what? That doesn't show up anywhere on your tax return, right? Your marginal bracket does not show up anywhere on your tax return. And when you start digging into the nuances, It's actually not just how much income you have, right? It's a certain type of income that determines your marginal bracket. So teasing these things out and putting them together in a 1 to 2 page easily digestible summary report just goes a long way in helping your clients understand taxes, makes you look like a much more trusted advisor, primes them for understanding any sort of tax planning strategies that you want to talk about. Hey, this year looks like this, even though last year looked like that. Maybe there's some things that we want to do. But even think one step beyond that. Your client's taxes, their tax bill is probably their single largest expense that they've got. Why wouldn't you be focusing on your client's single largest expense, particularly in a world where tax planning is something that you can do every year for every client, even if you're just telling them how they got to their tax bill? That is different than leading with a value proposition of saying investment management, which You know, that's a tough promise to fulfill. Like, we're always going to get you better returns. We're always going to do this. Like, you can't really in good faith do that. But looking at somebody's taxes every year, that is easily something that you can do. And you can probably find value whether you're changing somebody's out— what they're doing or not, just understanding how they got to their tax bill so that when you do have a solution to propose, they're much more amenable to it because they understand they've heard you talking about this for years and now it can finally apply to their situation.

Ben, I just want to highlight because I say this all the time: taxes are the biggest expense you'll ever have in your lifetime. I can't say that enough, right? I say it probably 50 to 100 times a day, just in general conversation. But like, like, look, you know, not not that it's just the biggest. Let's talk in practical terms for a minute, right? Like you you've been in the financial advisory. Like what's the typical Advisory fees on around the country, what you see?

Oh, you know, I think industry average for a long time has been about 1% of assets under management, you know, give or take.

Right. Middle-class America though, right? Tax brackets are 22 to 24, right? And yet we consistently have in the advisory space, we have people who will nickel and dime over a quarter of a percent on their investment fee. But won't dive in to try to save 3% to 4% on taxes, right? Is that one to two page simplistic report comes out? You know, what typically would somebody see like on that report where they can see real value by doing tax planning?

Bare minimum, what you're going to be able to see is where you land in terms of your marginal bracket, which again, you know, I've been doing this job now for 3 years. I've seen hundreds of thousands of returns and worked with many advisors. Even advisors with the CFP designation after their name fail to draw a distinction between taxable income, which is a number that shows up on the tax return, and somebody's marginal tax bracket. Those 2 things do not necessarily equal each other. Just as a straight-up example, if you had $100,000 of long-term capital gains after deductions and everything, your taxable income is $100,000, right? Your marginal tax bracket is 10% because you had no ordinary income. All of your income was qualified dividends and long-term capital gains, and those were actually taxed at 0% if you're a married filing jointly couple because of the way that capital gains are taxed. You're not going to find that on your tax return. So understanding just that concept by itself and being able to isolate, here's how much income you had and here's the rate that the last dollar was taxed at. And look, we actually had more room. to actually be taxed at this rate. And that would be beneficial even though you're paying taxes this year, because 10 years from now, we think your tax bracket's going to be higher, right? We've only talked about one concept already, right? And that just is a springboard conversation about multiple different types of tax planning techniques, whether that's realizing income or deferring income or, you know, taking capital gains because you're not going to have to pay any taxes on them if your income is low enough. That's a singular panel. on a holistic plan tax report that can again springboard you into 20 minutes of conversation with a client.

So, we had a holistic plan, right? Or actually, let me, let me, let me draw, let me go off script just a little bit and let's draw a distinction a little bit.

Let's do it.

Between, but between like, what is a CPA's role in the tax planning, in the tax process versus like a certified financial planner who does tax planning? What's the difference in those roles?

Great question. Whenever I give this answer, I always caveat this by saying CPAs are fantastically smart people who are really, really good at what they do. And so this is not meant to be disrespectful or throwing shade at anybody. A CPA's job almost by definition is recordkeeping and compliance, right? You know, and they will take, some CPAs will take issue with that and that's fine. But you know, if we're trying to boil this down, it's does every number, can I source every number that shows up on a tax return? And do I get the right dollar amount in terms of taxes paid for the information that I've got, right? That's what a CPA does. And so, you know, from a very high level, a CPA's job is to look over their shoulder backwards, right? What happened to get us here? You are starting to see more of this, but stereotypically, rarely do you see a CPA looking forward and saying, okay, this is what we should do this year and next year and 10 years from now for this long-term outcome.

Yeah.

Right? Again, you're seeing more of that now, but 20 years ago, you know, it's pretty rare. And the reason is because that's not how they're paid, right? You know, they're paid to complete returns and to do audits. And so, you know, this type of work is not easily compensated from a CPA's model. CFP or financial advisor, on the other hand, you have direct access and knowledge, assuming you're managing full wallet share of most, if not all of your clients' financial accounts. You know where everything is. You know how all the different parts and pieces are interacting together. You are well situated to be in that spot that say, okay, yes, based on what's happened last year, we can use as a model this year, but I kind of know what's happening this year from a cash flow perspective, from an investments perspective. I am uniquely situated to be able to understand the implications of doing one thing versus another thing and how that impacts your taxes. And by the way, I'm thinking about the you 10 to 20 years from now when you have to start taking money out of these retirement accounts that I told you you should put all the money in. Hey, by the way, not every dollar is created equal, right? A dollar in your traditional IRA is not equal to a dollar in your Roth IRA that is equal to a dollar in your brokerage account. So we need to have that knowledge of how all these things work together from a tax point of view to be able to work with you to have a tax-efficient drawdown strategy, right? Who else is going to do that? CPA's not going to do that. It's not their job, right? But a financial advisor, it most definitely is.

That's great. And you know, I have a lot of friends who are CPAs, a lot of professional colleagues who are CPAs. They are, you know, you want to talk about from a stress level and a deadline standpoint, I mean, just, just pound for pound, like they, they do their job better than anybody else out there. But you're right.

100%.

You know, like, you're like looking back, right? Their job is to save taxes today. That's how I say it, right? And they're And they do an amazing job. My CPA does an amazing job at doing that for me. And they'll look ahead like maybe 1 or 2 years. They don't look like over the next 30 or 40 years.

Yeah. I mean, to your point, you know, they will look for how can we defer as much tax as possible today, right? Because that's, that's the goal. But the reality is like it might be worth paying a little bit of tax today if the offshoot is paying way less tax 10, 20, 30 years from now. Correct.

That's exactly right.

You have to be thinking about that. That's why a financial advisor is looking forward, right?

Speaking of 10 or 20 or 30 years from now.

Oh boy.

What, what does, what does Ben think taxes are going to be like 10 years from now?

Mike, I have no idea. I don't know what taxes are going to be like next year, right? Let alone 10 years from now. I mean, I have a pretty good idea for next year, but the big bugaboo is I don't know. And nobody else really knows what taxes are going to look like. 2 years from now, let alone 10 years from now, right? So 2 years from now, we've got this big showdown set up with the Tax Cuts and Jobs Act technically expiring, assuming there's nothing that changes. I should say sunsetting away, in which case all the rules are going to revert back to the way that they were in 2017. It's just everything's now going to be adjusted forward for inflation. So we've had 7 years to kind of get used to this one way of thinking about taxes, And potentially a year from now, all of that's going to be undone. If you had asked me 10 years ago what I thought taxes were going to be like 10 years from then, you know, so going back to 2014, you would've been way off, right? You have no idea. And so this concept of, I'm going to build, you know, a 20-year tax plan for you, a 30-year tax plan for you, I would say that's probably not worth very much because 30 years ago from today, the taxes tax situation was so very different than what we're looking at right now, then I don't think you can really do that with any degree of anything close to certainty, right? So it might be, it's a long-winded way of saying, I don't know, Mike, what do you think?

I think your words of like there being a showdown is exactly, is exactly what's going to happen, right? And I think in, you know, in a showdown where we've got a lot of people who just don't agree with each other, I think for a period of time, we're going to revert back to 2017.

Yeah. So I will remove my Holistic Plans sweatshirt and gear and say, this is my personal opinion, potentially as an advisor. So this is not Holistic Plans' opinion. I just want to clear that out. I suspect we're going to have something that we've seen before, which is we're going to actually start 2026 with the stuff sunsetted out. And then at some point in 2026, there will be some sort of agreement that will make things retroactive to the beginning of the year. Now, right, I hope I'm wrong, right? Because as a tax planning software company, that's the worst possible outcome. Certainty is way better. But if you ask me to lay odds on it, I wouldn't be surprised if that was our outcome. I hope I'm wrong though.

What do you think? I mean, just since, you know, this is again, not Holistic Planning, this is just Ben, right? Just Mike and Ben chatting here. Ben, what do you think about this whole unrealized capital gain thing that's going on or being talked about out there right now? Do you think that's— you think that could ever possibly come about?

I think the practicalities of doing that are pretty tough. I would also venture to say most of the people that are listening to this or the clients of the people that are listening to this probably don't need to worry.

Yeah.

You know, unless you are in the habit of working with people that have hundreds of millions of dollars because, you know, these are things that are being targeted towards a very, very small portion of society.

And that right there, I'm glad you said that. We didn't even talk about this ahead of time because that's really who the target is, right?

Yes.

It's not really, they're not targeting middle America here. They're targeting—

They're targeting people with hundreds of millions of dollars, right? Now that doesn't mean that it's necessarily good policy. It will still be challenging to do. But in things of like stuff that we're worried about, right? I'm sorry, this is something that is bothering you and worrying you. You've done pretty well. So, you know, but most of the people that are going to be hearing this podcast, I struggle to think that this will impact our lives one bit.

Correct. That's exactly right. We have— we still to this date have not had Elon Musk listen to this podcast.

As far as you know.

As far as we know, right? But He will. At least he hasn't responded and like to contact us.

I think that's probably for the best.

Probably true. Hey, let's put your holistic plan hat back on. We'll put that back on for a second. So, how can like a holistic plan report, you know, realistically and practically impact somebody's long-term outcome?

Well, I mean, I think the report itself does a really good job of describing where somebody sits, right, in narrative form from a tax point of view. So we mentioned just one singular panel on there breaks out where you are in marginal brackets, but there are other panels in there that summarize, here's what you had from interest and dividends last year. Here's what you had in terms of itemized deductions last year. Here's where you slot out in terms of a series of taxes, credits, deductions, what have you, that are all governed by Well, what was your modified adjusted gross income? Which, by the way, there are like 7 different definitions of modified adjusted gross income, right? So we're trying to pull things from the return and put it together in a way that creates some actionable steps for, you know, an end client or an advisor. The bottom half of that report actually has written observations, right? They're not suggestions, they're not recommendations, but they're written observations that say, okay, the software noticed You filed this schedule or you had this particular dollar in this particular field, you should consider a Roth conversion. Or, you know, you had self-employment income, you might consider a retirement plan uniquely available to self-employed individuals, right? So these are starting to get at what software is really, really good for, which is doing a lot of calculations or a lot of work in a short period of time in a much more efficient way. Identifying patterns, and then putting that all together for an end user to use, right? It's not saying that a human couldn't do this. They could. It would just take 30 to 45 minutes, whereas HolisticPlan can do it, you know, in a matter of like seconds or a minute.

That's exactly right. That's— it's a time-saving mechanism.

It's a time-saving. Now that's just looking backwards though, right? So, you know, the other element of the software is it has a projection tool where you can start looking at this year and current years and saying, okay, If this is our income picture and our deduction picture, here's what your tax bill's going to be. If we do this, here's what it will be higher or lower. Here's what it might be like 3 years out, 5 years out. I already, you know, I just poo-pooed the idea of long-term projections, which I still believe in, but you have to have something, right? So you can go about 10 years inside the full list of plan. So you're not just looking backwards, you're using looking backwards to set a foundation of what this year might look like. And then you can use that tool to start modeling different scenarios for your clients.

For most of our clients, one of the things that we know, like, you know, middle-class America, people who've saved money in their 401s and Thrift Savings Plans, right? More than likely, you know, they've been told over many years that your tax rate will be lower in retirement than it is when you're working. We just, I mean, I think you'll agree with this, we just proved that not to be correct. Wouldn't you agree with that?

I mean, I think it depends on the person. That's why, you know, I think broad Broad brush strokes of that are really dangerous. You know, I say that as somebody who has an inherent bias. I want people to use the software, but I say that with conviction, which is everybody's situation is a little bit different. What you said might very well be true for some folks. It might be different for others, right? If they've saved so much in their retirement plans that the distributions that they're going to have to take will actually push them up to a higher bracket. than when they were contributing, you know, that's potentially going to be an expensive deal for them. But I think, you know, where the benefits of the software and coming with an advisor is, you've got time, right? You don't need to start taking money outta those retirement accounts right away. Now, some folks do 'cause it's their only source of income. But if you've got this gap between retirement and when you have to start taking money out, you can plan some efficiencies from a tax point of view and take advantage of lower tax rates for this special golden window between when you stop working And when you have to take the money out. And what better way to illustrate that benefit than, you know, using something like a holistic plan where you can show somebody before you do it, here's what we're going to do and here's why. And by the way, it's not going to cost you all that much.

Ben, you are, you are a treasure because there's not many people who get so excited as you are about taxes, right?

My family members do not use the same language to describe me for the same behavior. Keep going, Mike.

Here's the last question I got for you. We always talk about a one-of-a-kind life, because we're all living a one-of-a-kind life, right?

How—

and this is, this is an out-of-left-field question— but how does tax planning allow one to live a one-of-a-kind life?

What a great question. The way that I would probably frame that would be to kind of tie into something that I said before. Which is illustrating the difference, I think, between how a financial advisor and a CPA might look at the world of taxes, right? A CPA, again, not everybody, but broad strokes, how do I minimize this year's taxes? The advisor says, how do I minimize my lifetime tax rate? And by minimizing your lifetime tax rate, you are maximizing the use of all the other dollars that you want and have available to use. For that one-of-a-kind life, right? You can't do that one-of-a-kind life if you are unknowingly or unwittingly paying more than you might need to from a tax point of view, right? Not illegally, like we're not trying to drive people's taxes down illegally, but why pay one more dollar than you have to? Because every dollar that you pay in taxes is a dollar that you can't spend on yourself. And you can't have a one-of-a-kind life if you're not Maximizing the dollars that you spend on yourself.

That, that is well said. And without even giving you prompting, right? Because like the mission of Ideas by Mike is to— we create one-of-a-kind plans for your one-of-a-kind life.

Wonderful.

And it's, it's just, it's just, uh, and what people need to realize is everybody's living a one-of-a-kind life. I know your family said that, you know, they would say something different about you, Ben, but then you are living a one-of-a-kind life.

Thank you. I'm doing my best.

Wendy, hadn't it been great to have a guest on here?

I know, and a new experience. This is so cool. Thank you, Ben, for being here today.

Thank you for having me.

All right. So, Mike, if people have more questions, want to find out more about the One of a Kind Plan, how do they go about getting in touch?

Everywhere you search, you search for @ideasbymike, and you can go Instagram, LinkedIn, Facebook, you can go to our website, www.ideasbymike.com. We, Wendy, we offer the whole, you know, a holistic plan report for our clients and our prospects at no charge. Because like Ben said, and like I say repeatedly, it's the number one expense you'll ever have in your life. And if we can't control or at least have some ability to reduce that around the edges, Well, we're just like everybody else. And we don't want to be like everybody else because we're also a one-of-a-kind firm. And so, if you want your Holista Plan report done and performed by Ideas by Mike with the support of great people at Holista Plan like Ben on the backside, we're here.

All right. Sounds great. So, thank you to both of you for being here today. And thank you for listening. Please like, follow, and share this podcast with your friends. Until next time, I'm Wendy McConnell.

Thank you for tuning into Ideas by Mike, the podcast, the show where ideas turn into money. If you enjoyed today's episode, make sure to click the follow button to stay up to date on future releases. For additional information on becoming a part of the Ideas by Mike community, check out our website at Don't forget to take a look at the show notes. And for more financial insights, subscribe to the Ideas by Mike YouTube channel or visit the website to find one of the upcoming webinars. Also, connect on Instagram or Facebook @IdeasByMike. Ideas by Mike is an LLC headquartered in Virginia with offices in 42 cities. The company owns an insurance agency registered in all states directly or through affiliate companies. Mike is an investment advisor representative with JB Wealth Advisors. Any financial planning information shared on the show should not be construed as financial advice for you personally. For your one-page financial plan, please reach out to Ideas by Mike through the website. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of Ideas by Mike. The content has been made available for informational and educational purposes only. The content is not intended to be a substitute for professional investment advice. Any financial planning information shared on the show should not be construed as financial advice for you personally. For your one-page financial plan, please reach out to Ideas by Mike through the website.