How to Achieve Tax Alpha by Integrating Advanced Tax Planning With Wealth Management

By DeBlanc + Murphy
August 22, 2022

“It’s not about how much money you make, but how much money you keep.”

We’ve all heard this mantra probably several times. But it really is true. Just look at your last paycheck. The difference between what you made and what you kept after taxes is probably stark and infuriating. Taxes take a huge bite out of your income and impact all areas of your financial life. They impact your salary, your business income, and your investments. They impact your retirement, your estate, and your kids’ college savings plans. They even impact how you give to charity. Simply put, taxes are pervasive, and are your largest ongoing living expense. For this reason, integrated, advanced tax planning is imperative in the context of wealth management.

True wealth management takes a comprehensive approach to financial planning. It’s not just about managing investments. It’s about managing all the financial levers that impact your wealth. And taxes are a big and very important lever. Failing to integrate tax planning into your financial plan is a costly mistake that will erode your after-tax total return. That’s why it’s so important that you work with a wealth management firm that has both skilled financial advisors and seasoned tax professionals.

At DeBlanc Wealth Management, we are tax-focused, wealth planners. We integrate tax and financial planning expertise in a way that seeks to improve your total return by reducing your effective tax rate over your lifetime. In other words, we seek to deliver what is known as “Tax Alpha.”

What is Tax Alpha?

You may have heard the Greek term “Alpha.” In financial parlance, Alpha (α) measures an investment’s return in excess of the broader market’s return. “Tax Alpha” is similar. But rather than trying to predict the future and pick winners in order to beat the market, Tax Alpha seeks to increase your total return over time through the effective management of taxes. In essence, Tax Alpha seeks to ensure that you keep more of what you make.

How can DeBlanc Wealth Management help you achieve Tax Alpha?

There are several ways we integrate advanced tax planning with our traditional wealth management services in order to increase your after-tax total return:

1. Managing transactions before they occur in order to affect a better outcome.

Engaging in a transaction to buy or sell an asset usually carries significant tax consequences. Knowing what the transaction is and modeling it out before it occurs enables us to project the tax consequence, and possibly suggest an alternative course of action that may produce a better tax result.

2. Responding to tax law changes.

Changes in the tax code are inevitable. Some changes are small. Some are sweeping. Proactively responding to those changes enables us to reposition the plan and investment strategy to create temporary and permanent tax savings.

3. Tax-optimized investment portfolios.

Managing asset location along with your asset allocation can produce a higher after-tax, total return by matching the tax benefits of both income and account type. For example, qualified dividends and tax-exempt interest are two forms of tax-advantage income. The dividends are subject to a lower tax rate. As the name suggests, the tax-exempt interest is subject to no federal income tax. By placing assets that produce tax-advantaged income into taxable accounts, you optimize the income's tax benefits. Alternatively, ordinary income is subject to a higher tax rate. By placing assets that produce ordinary income into qualified accounts, such as a traditional or Roth IRA, you can defer the tax on that income into the future or eliminate future taxation entirely. In this case, you are optimizing the account type's tax benefits.

4. Tax loss harvesting.

Tax loss harvesting is a strategy where an investment with a temporary decline in value is sold and replaced with a similar investment. This recognizes the loss for tax purposes but maintains the portfolio’s asset allocation. This strategy is table stakes for any wealth manager. However, integrating tax planning into your comprehensive financial plan can magnify its impact. Losses harvested from the investment portfolio can offset gains from outside the portfolio and vice versa. This can reduce your overall taxable income.

5. Tax-efficient liquidation strategies.

It’s usually during times when you liquidate investments or take the money out of your accounts that a taxable event occurs. Managing that tax event is critical. With integrated tax planning, we can review your complete financial picture and liquidate assets in the most tax-efficient way. This allows us to manage your tax bracket not just to lower your tax rate this year but to lower your effective tax rate over your lifetime.

6. Managing tax payments.

People hate paying taxes, especially having to pay a balance due on filing their tax returns. It may be nice to get that tax refund at the end of the year, but that is a psychological trick. If you get a refund on your tax return, you give the government an interest-free loan. By preparing detailed income tax projections, we can help you not overpay and not subject yourself to underpayment penalties and interest charges. This enables you to access more of your money throughout the year rather than have it tied up with Uncle Sam at 0% interest.

7. Efficient collaboration between tax advisors and wealth managers.

We’ve heard countless stories of financial advisors implementing an investment strategy without first speaking with the tax advisor or even considering the tax consequences. Bringing these two functions under the same roof can eliminate this misstep. It also eliminates the communication barriers between advisors and creates efficiency in the planning process. That can produce real savings by lowering your fees to multiple advisors.

These are just some of the tools we use at DeBlanc Wealth Management to deliver Tax Alpha to our clients. If you are interested in learning more about how we can help you achieve Tax Alpha, please contact to get started.

Wealth management services are offered through DeBlanc Wealth Management, LLC., a Registered Investment Advisor and sister company of DeBlanc, Murphy, and Murphy, LLC.

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