As tax time approaches, it’s common to feel frustrated with taxes seemingly taking a big bite out of your investments. However, the good news is that you can minimize the impact of taxes by investing in a tax-efficient manner.

Whether your clients are in the Guide to tax-efficient investing phase or approaching retirement, keeping taxes in mind is important for their overall investment outcomes. With proper asset location and transaction timing, you can help your clients keep more of their returns by reducing the amount that’s sent to the government.

Guide to Tax-Efficient Investing

The location of your investments can have as much or more of an impact on your portfolio returns than the specific securities you own. Ideally, you want to own tax efficient investments in the right accounts—taxable and tax-deferred (such as IRAs, 401(k)s, and deferred annuities). Tax-efficient investments include municipal bonds, exchange-traded funds (ETFs), and passive equity strategies. In general, taxable accounts are best for holding investment assets that lose less of their returns to taxes and tax-deferred accounts are better homes for investments that tend to pay higher levels of tax, such as taxable bond funds and high-dividend yielding stocks.

As a financial advisor, you are uniquely equipped to educate your clients on the value of an integrated wealth strategy that takes into account federal income taxes. In addition to helping your clients manage and reduce their federal tax liabilities, you can also support them in lowering state and local taxes through a variety of strategies.