Episode #303: Kevin Lozer, Holistiplan, “Streamline And Scale The Tax Planning Process For Advisors”

Episode #303: Kevin Lozer, Holistiplan, “Streamline And Scale The Tax Planning Process For Advisors”

 

Guest: Kevin Lozer, CFP is the co-founder of Holistiplan, an end to end tax planning tool for financial advisors and the owner and founder of Oakton Financial in Northern Virginia.

Date Recorded: 3/24/2021     |     Run-Time: 46:09

Summary: In today’s episode, we’re talking about how advisors can utilize technology to help with tax planning, something that’s historically been a very manual process. Kevin shares how creating software to help with tax planning for his own clients then turned into a standalone business. He walks us through the process of using the software and how it not only saves the advisor time but also helps find potential planning opportunities. He also explains how advisors have been utilizing the tools to help with business development.

As we wind down, Kevin shares why the software complements instead of competes against CPA’s.

Sponsor: Bitwise – The Bitwise 10 Crypto Index Fund is the world’s largest crypto index fund. It holds a diversified portfolio of cryptoassets, including bitcoin, ethereum, and  DeFi assets. Shares of the fund trade under the ticker “BITW” and are accessible through traditional brokerage accounts. Shares may trade at a premium or discount to net asset value (NAV). For more information: www.bitwiseinvestments.com

Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159

Interested in sponsoring an episode? Email Justin at jb@cambriainvestments.com

Links from the Episode:

  • 0:43 – Intro
  • 1:28 – Welcome to our guest, Kevin Lozer
  • 2:48 – Kevin’s origin story from corporate finance employee to software entrepreneur
  • 4:22 – Friction in the tax processing that pushed Kevin to adapt and innovate
  • 7:24 – What Holistiplan does and how his software works
  • 9:10 – Holistiplan Introduction Video
  • 9:14 – Outputs from the tax report an advisor gets to see
  • 11:09 – Programmed guidance and error alerts for advisors
  • 12:51 – Case studies using Holistiplan
  • 15:35 – Adapting to constantly changing tax legislation
  • 17:39 – Potential opportunities for a personal tax product
  • 19:07 – Turbotax’s monopoly
    21:02 – Can non-advisors sign up and use Holistiplan?
  • 21:03 – Business model and subscription plans options
  • 23:12 – Early adopters of the software
  • 24:31 – Feedback from advisors who are currently using the product
  • 27:19 – Sponsor: Bitwise
  • 28:10 – The state of the industry and competitors before Holistiplan launched
  • 29:57 – How tax planning becomes simplified and accessible with new tech
  • 33:14 – Building Holistiplan
  • 35:37 – What’s on the horizon for the Holistiplan
  • 39:09 – If Kevin could change the tax code, how would he change it?
  • 41:16 – Why is the general public left to figure out what they owe every year?
  • 43:01 – Kevin’s most memorable investment
  • 44:48 – Learn more about Kevin; Holisitplan.com; info@holistiplan.com

 

Transcript of Episode 303:

Welcome Message: Today’s episode is sponsored by Bitwise. You’ll hear more about them later in the episode. Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria investment management or its affiliates. For more information, visit cambriainvestments.com.

Meb: What’s up everybody? Fun show for you today. Our guest is the co-founder of Holistiplan, a tax planning software for financial advisers. In today’s show, we’re talking about how advisers can utilize technology to help with tax planning, something historically has been a very manual process. Our guest shares how creating software to help with tax planning for his own clients then turned into a standalone business. He walks us through the process using the software how it not only saves the adviser time but also helps find potential planning opportunities. He also explains how advisers have been utilizing the tools to help with business development. As we wind down our guest shares why the software complements instead of competes against CPAs. Please enjoy this episode with Holistiplan’s Kevin Lozer. Kevin, welcome to the show.

Kevin: Thank you.

Meb: Where in the world do we find you today?

Kevin: Yeah, so I’m in rainy Washington DC area suburbs in Reston, Virginia.

Meb: I have a question to ask you. Does the Rock Bottom Brewery still exist in that area?

Kevin: I think it still does. I frequented it in Bethesda quite a bit back in the day about 15 years ago. But with little kids, I don’t get there very often anymore. So I’m not sure it exists.

Meb: Rock Bottom Brewery when I was 22, 23 years ago, they had a $2 Tuesday. So you get a pint of beer for two bucks. Obviously, it was a lot of young professionals right out of college because they’re all broke. But also Rock Bottom Brewery holds a special dark place in my heart because that was one of the first stocks I ever bought. It did not do well. I remember the ticker symbol to this day, BREW. I think it still exists. It may even trade. I have no idea. Long purged it out of my head. So I’m like the only person to have missed the microbrewery boom by investing in that company. Everyone else seems to have made hundreds of millions of dollars. So next time you pass by think of me and see how much Tuesday happy hour costs today, it’s probably $5.

Kevin: Yeah, I’m sure it is, especially in this area everything’s gone up double or triple since I moved here about 25 years ago.

Meb: Well, today’s going to be fun. We’re going to talk about all things planning and software and all the different variants. Someone who started out as a planner and eventually went down the entrepreneur, software route. Give me a little bit about your origin story. You started out as a traditional CFP, right?

Kevin: Even before that I started out in corporate finance. So I moved down here to Bethesda, same place you moved to after college. I came south though, from Penn State and started with Marriott and spent actually my first 11 years in corporate finance, doing a whole bunch of different things. And then transitioned into financial planning in my early ’30s. Went the CFP route. I got hooked up with a fee-only firm at the onset and went from part-time employee. Start with the solo adviser to becoming his partner down the road. Did an acquisition along the way, but learned a lot about advising, learned a lot about dealing with clients, working with clients. It was a lot of fun. And in fact, I still do have a smaller solo RIA as well, that I have a handful of clients. I enjoy being an adviser very much and it’s been a fun 12, 13 years. I actually started in the industry, my first job, and only job before I started my firm was the day Bear Stearns went bankrupt. Interesting time. I’ve never been a good market-timer when it comes to making career choices.

Meb: A former podcast guest just sent me a Bear Stearns sweatshirt in the mail. So I’m now the proud owner of some claims on Bear Stearns assets I think. All right, so you’re behind the desk as a practitioner. And I feel like this is the normal, most traditional origin story for entrepreneurs where they spend all day with something and then something just sucks or something just doesn’t exist that you wish did. And eventually, the frustration is so present, and gnawing, and everlasting that you just have to try to fix it. Is that accurate? Or was this sort of a different path you guys starting this software company?

Kevin: That’s definitely a large part of it for both Roger and me, actually, I was helping run a firm and we were adding staff. We were trying to add more and more services for our clients, what I call a mid-sized RIA at that time 200, 300 clients and we were trying to do a lot more tax planning. And we were finding it was very difficult and very time-consuming to do. We were using Excel spreadsheets and manual checklists that were four or five pages long in Word and just manually going through a tax return and comparing it to the checklist. And then going into Excel and trying to quantify potential planning opportunities. Maintaining that spreadsheet was time-consuming. The whole process was time-consuming.

Early 2019, as I had now launched my own solo RIA, but I was thinking of other opportunities as well. I connected back again with Roger. Roger and I had been friends for many years in the industry, he was running a similar-sized firm in Texas, that I was running in Virginia. So we put our heads together and came up with Holistiplan, which starting as a way to really streamline and scale the tax planning process for advisers. It started with that, how to scale the tax return review process, that was one of my pain points. And it has now developed into a really year-round tax planning software that allows advisers to touch tax planning throughout the year for all their clients.

Meb: For some people, eyes roll back in their head, they start talking about taxes, “Oh gosh, this is like going to be nails on the chalkboard or sleep-inducing.” But we often say on this podcast that two of the biggest determinants of performance net worth over time, of course, that people ignore are fees of all time and then taxes. Granted, my angle is usually talking about ETFs. But the simple blocking and tackling, I’ll give you a good example. You know, my mum, many years ago, had switched CPAs or planners, I can’t remember what it was. And I had reviewed her return for the new one. And he had neglected to move over a capital gains loss. And it was the difference of like $10,000 in taxes, very material cost, this concept of humans doing it in a world of often 100-page tax return seems sub-optimal, foolish, would be a stronger word. So walk us through what your company’s software actually does, the one-minute overview, and then we’ll get into all the weeds and sort of use cases in more detail.

Kevin: As an adviser, you’re going to upload your client’s tax return the PDF document, ideally, you’re not even going to touch it with your hands, you’re just going to electronically get the document and upload that document. A lot of them today come with estimated payment sheets or CPA cover letters, it doesn’t matter. Just upload the whole document and Holistiplan finds the data we want to find to produce first of all a client deliverable, and it’s going to do that in seconds, that’s really going to summarize the tax return and also the tax situation the client is in. It’s also going to analyze that data and provide planning observations, potential opportunities for the adviser to dig in a little bit further, or just flat out communicate to the client right there from the tax report itself. So that’s really step one of the process of the tax planning process. Now that you or the software, in this case, has identified potential opportunities, you may want to quantify those, maybe it’s identifying a potential Roth conversion or donating to Donor Advised funds, things like that. Now you want to model those, we make it really, really easy to model that because we’ve read in all the data from the prior year’s tax return, we provide that for you. And all you have to do is copy it over to the next column. And now you can start changing some numbers really quickly and model whatever those planning opportunities that you want to model.

Meb: Walk me through kind of like what are the main outputs? Like what do we see? You get a PDF. I imagine we’ll post one to the show note links if you have anything that you want to share as an example. I mean, you guys have a great explainer video we’ll link to that’s pretty intuitive. But what are some of the main output fields? You have tax bracket, what else? What does the adviser see? What are the useful sort of outputs they get?

Kevin: In that tax report itself you’re going to get some things that aren’t even on the tax return at all that you need to if you’re doing tax planning as an adviser, or even if you’re not, but you need to be aware of bracket information, or thresholds, and phase outs, and it seems like we’ve got new ones of those every single legislation that gets passed. We have new ones that yet again with the American Rescue Plan Act. But we’re going to provide you where the client is for modified adjusted gross income for example. Again, a number not actually on the tax return, you’ve got to calculate that based on AGI and a formula that the IRS gives you. And it’s not just one formula, there are actually multiple formulas for MAGI. So we provide a table in that report to say whether it’s net investment income tax, credits, deductions, phase outs, any kind of limit or phase out that requires MAGI as a point, a data point, we provide whether the client is over, under or in any one of those various phase outs. But we’re also providing numbers like effective rate or average rate.

A lot of folks can figure out relatively quickly what marginal bracket they’re in. But they may not know what their actual rate that they paid in total for taxes are. And that’s often a lot lower number than they think. So I spend actually a fair amount of time pointing that number out to clients, particularly the ones that think in their head, “Oh, I’m in the 35%, or I’m in the 24% tax bracket.” Well, yeah, maybe you are for ordinary income at the marginal level, but you actually only paid 10% or 11% actual average rate in taxes. And that’s a surprising number for a lot of clients and a helpful number for a lot.

Meb: And so once they have just the general overview stats, like what are some of the other reports, output? You mentioned…does it actually give, “Hey, you should consider this?” Or is it like the adviser gets that information? I mean, you’re talking about Roth conversions? Does it ever flag errors being like, “By the way, you shouldn’t be doing this, or this seems amiss?” Like, what’s the next level of depth of info after just the basics of, “Here’s your tax bracket.”

Kevin: It can do both. It’s certainly identified mistakes or at least guided the adviser to identify mistakes. We had one example where it was the adviser’s own return even where they uploaded, it identified that they were eligible for it. They could have done an HSA deduction. They did one it just never got through. The CPA didn’t file it correctly and record it correctly. So it can find those types of hiccups where what you did in the prior year didn’t get communicated correctly to the tax preparer itself. These errors are rare, but we do find them especially for folks that are filing that are self-preparing, some folks don’t realize that not all of their Social Security income is taxable. So that would be identified as well. We’re mostly focused on the forward-looking opportunities like what marginal bracket are they in and should they consider a Roth conversion? Or how old are they and should they be considering or look at charitable contributions in the prior year’s tax return, maybe offer up an opportunity…? Maybe they should be doing QCDs, depending on their age. We’ll give those little nuggets for the adviser to lead them in the right direction for planning opportunities.

Meb: Let’s go through some case studies. How are these advisers using it for the most part? Is it mostly current clients prospecting? Is that a way that people use it? Maybe walk through some actual examples of where it was particularly useful for advisers?

Kevin: People are using it for both, is the answer to your first question. When Roger and I built the software, we continually had in our minds, it was for current existing clients. The problem we were trying to solve was really how can you scale and make the tax planning process far more efficient for your existing client base. What we learned once we launched and started to see how folks were using it and hear how advisers were using it, we found more and more folks were using it for business development. And that’s a great opportunity to do that. Because now, if you can get the tax return from a prospect, and it’s probably not going to be in the first meeting, people are still a little hesitant to hand over their tax return to someone they’re meeting for the first time. But maybe in that second prospecting meeting where you’re potentially closing, if you can get that tax return, and quickly produce a client deliverable that shows the types of depth you can go into from a tax planning perspective, that’s really going to be a differentiator and sets you apart from a lot of the advisers in your town that aren’t doing tax planning, because most advisers still aren’t doing any kind of tax planning. There are multiple reasons for that. But that’s quite a differentiator in the business development and the prospecting process.

As far as case studies and how folks are using it, especially in 2020, lots of opportunities to do Roth conversions. So tons of advisers were looking into Roth conversions with RMDs being waived with folks being unfortunately maybe laid off, temporarily laid off or their business income being a lot less. There were a lot of different opportunities in 2020 to bring income into that year. And a Roth conversion is obviously one of the bigger opportunities and more common opportunities, but it could be delaying deductions in 2020 was another common one. We see that. So Roth conversions. We see QCD analyses by charitable distributions. Donor Advised funds. So there’s one where if there are opportunities where you can lump up a whole bunch of charitable giving in one year via Donor Advised fund, and then take the standard deduction now that that’s been raised after 2018, to take the standard deduction in the next couple years. When you look cumulatively over three or four years, you’re going to get larger deductions across those years that way, taking the itemized deduction, potentially every year, and loading up, schedule A charitable deductions instead of a QCD.

Meb: What are some of the more non-traditional ways the software can help out? I mean, you talk about a lot that already has my head spinning. And I imagine, my God, that just updating this software on a yearly basis and all the scenarios has to be a pretty big project. How do you keep up with it all, particularly all the ones adding features all the new sort of laws on the periphery? What’s the approach to that?

Kevin: So as far as all the tax legislation that has occurred since we launched, which has been numerous, we are committed, we dropped the proactive road-map that we’re doing, and get all of that legislation into our code, as soon as we possibly can. The CARES Act in early 2020, March of 2020. We had anything tax-related updated in a week. The appropriations bill, which has some tax impact, that was in December of 2020. That was done in a day or two. And now this most recent one American Rescue Plan Act, again, some pretty significant tax impact in that. And unfortunately retroactive in some cases, back to 2020, especially around the unemployment compensation. That’s all in our code now as well. And so that was done about almost exactly one week after it was signed by President Biden.

That is certainly a lot of effort, our product development team and Roger do a tremendous job in focusing exclusively on those changes and getting them in our code so that advisers can start using it. And this was particularly important for this most recent one, as folks have already filed 2020 tax returns or are about to in a lot of cases, and some of this legislation impacted 2020. To get that in the code quickly was really important. We’ve got lots of advisers using it for that purpose alone trying to figure out not only 2020, but now 2021, how are they going to stay under certain thresholds for their clients to try to make sure that they still get or will get the full allotment for stimulus payments, for example.

Meb: Obvious question, I understand the original reasoning of focusing on advisers. Is there a product at some point that is direct to individual? Is that a possibility?

Kevin: It’s certainly a possibility. Parents told me never to say never. So I would never say never. But right now, we’ve got so much opportunity in the adviser space. And also taxes are complicated. They’re complicated for us advisers. Again, it’s part of the reason why most advisers still aren’t doing even the basics of tax planning. There are tons of advisers now that still are managing assets and not thinking about the tax implications. You brought this up earlier, tax implications, potentially of selling that security. There are all kinds of now gotchas in the tax code, or Medicare IRMAA Premiums is another example where you go $1 over some of these phase outs, you sell $5 more of a stock than you should have and that could cost the client thousands of dollars down the road. And if not taxes, then other expenses like Medicare premiums. Even if your focus is solely on the investments management side of the business, what you’re doing day in and day out for clients is impacting their tax situation. I feel like as advisers, we got to be aware of that. It’s hard to do all of this without software at this point. There’s just too much going on and too many things to watch out for without using software today.

Meb: I was tweeting the other day about my single number one most frustrating company I can think of that has near monopoly is TurboTax. And it’s so ungodly, awful. I was like, “How is it in 2021 you can’t just upload your various forms and have the software create the tax returns and optimize it for you?” And y’all seem to be doing a variant of that to the point where you know, we don’t really do financial planning here but I was like, “Maybe I’ll just sign up literally for the employees in the office as a way to run this through their software to see kind of like what we’re doing wrong.” It just seems like such a no-brainer as a planning concept, but also potential…I don’t know if audit headache is the wrong word but in general, just like do you have your shit together concept. So I think a lot of people would certainly like it or love it, that’s for sure.

Kevin: I think it would be a matter of could we build the software in a way where it’s consumer-friendly. We rely a little bit on the advisers knowing enough about taxes, particularly the modeling part, maybe not the tax report. In fact, the tax report is quite educational in a lot of ways for advisers that are new to tax planning, it’s almost like it gives them an opportunity that aren’t doing it today to almost buy something off the shelf that’s going to guide them in how to do some tax planning. But if you’re going to take that next step and do the forward-looking projections and the modeling, then it’s really helpful to know some of the nuances of the tax code and educate yourself a little bit about it. So a consumer-facing one that would require a lot of…basically making sure you can’t plug in a number in the wrong spot and give you an answer that isn’t 100% accurate.

Meb: Theoretically speaking, could a non-adviser sign up and pay for your software? Is that even a thing?

Kevin: No, no. Right now, our terms and conditions require that you are an adviser if you’re signing up again because we don’t feel right now it is an end consumer-facing product at this time.

Meb: Tell me a little bit about the business. What’s the business model? You guys charge a monthly fee? Is it a per upload fee? How does it work?

Kevin: It’s an annual subscription model. It’s a 12-month subscription, you sign up. It’s a really easy setup process. We provide a seven-day free trial. You can upload up to three returns during that seven days, take an opportunity to upload a couple of different types of client situations so that they can see the various outputs that can come out of the software. And then after seven days, and three uploads, if you like it, you just stay on, we charge the credit card, and you’re moving forward. Those subscriptions are tiered. Most software today tiers their pricing based on number of users you’re going to have, the number of advisers, or the number of users in your firm. We chose to tier it instead based on the number of uploads. To answer your question, it’s kind of two ways. It starts with a 12-month subscription, that’s the core. But then each subscription has a maximum number of uploads that you can make for that price that you’re paying for the year. And it just tiers up from there.

So if you’re a solo adviser, for example, and you’ve got 10 clients, 15 clients, now, you would sign up for our starter package potentially, that gives you an opportunity to upload up to 30. If you’ve only got 10 clients, though, you’d find that at the price point, you’re getting your ROI easily just from the time savings of just doing it for 10 clients. And then we scale up from there. So we’ve got then from a 30 max upload, then 75 max upload for 999. And then we just continue to tier up all the way up to 1,000 uploads is our top price. And then beyond that, we have enterprise. Those are for the larger firms that we’ve signed. And that’s a separately negotiated contract with different terms.

Meb: And what’s sort of been the feedback uptake so far? Has it been mostly the mum and pop solo practitioners? Has it been the bigger operations with a number of advisers? Has it been a mix? Where do you guys stand?

Kevin: It started at the smaller firms, the solos and what I call ensembles, the two partner, three partner type firms with a few hundred clients. That’s where it started. We obviously continue to bring on lots of those folks every month as well. Now we’re starting to see though larger firms come on board too. We announced a few larger partnerships recently, I think that’s opened up the idea as well for other large enterprises, they’re seeing the value. For larger firms, it’s as much about consistency as it is efficiency. I’ve talked a lot about the efficiency of using software like this. But for those larger firms that have hundreds of advisers, or tens of advisers across the nation software like this provides the consistency they’re looking for that they know every adviser in every office is providing the same type of deliverable and doing the same level of work on the tax planning side for their entire client base. That’s a huge, I think, value proposition for the large firms.

Meb: From anyone who’s been involved in software, it’s an effort of constantly iterating. What’s been some interesting takeaways from advisers, practitioners that are actually using it, feedback that has been worked into the product, or different avenues you guys have gone down from actually having real-life people banging on the software the last few years?

Kevin: So when we launched which was back in the summer of 2019, really what we started with…our prototype was really upload a return and get a bullet point list of observations. And that was really it kind of like an expert system type of software. Then we started getting feedback from our beta testers and some friends in the industry. You really kind of need a client deliverable, a report of some kind that’s cleaner nicer. So we worked on that. Then we got some feedback from advisers that they’re savvy planners that focus on taxes. And the report while it saved them some time, it didn’t provide them any new information that they couldn’t have found pretty quickly on their own, because they already knew how to review a 1040 really quickly. What they wanted was the data to go into a tax planning software of some kind so that they could do modeling, forward-looking projections in modeling.

We investigated that a little bit. And there really weren’t any software out there that would be able to do the integration like that. So we built it ourselves. That’s that modeling that we call it the scenario analysis that allows you to do the forward-looking projections. And then from there now what we’re focused on and what we’ve been hearing from our subscribers is, we just launched a feature that’s called Tax Prep Letter that allows advisers to proactively compile all of the things they did in the prior year from a tax planning standpoint, that’s going to impact the filing of their client’s taxes. So right now folks are doing it for the 2020 tax year before the CPA or the self-preparer starts filing it, their tax return, incorrectly. This is a proactive way to identify, “Hey, well, you did three QCDs this year,” for example. Make sure that gets communicated. We provide a letter now or the adviser can provide a letter from Holistiplan that tells the CPA, “These were the three QCDs that were done for the client, make sure that that doesn’t show up as taxable income on the tax return.” We’ve closed that gap now that we saw and advisers were telling us about where we do some great planning work and execution, but that doesn’t get communicated and filed the correct way on the tax return. And if it doesn’t get filed the right way, then as far as the IRS and the client is concerned it never happens.

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What was the state of the industry before you guys launched? Were there some competitors? Was it the more traditional planning software, anyone kind of doing what you guys were doing?

Kevin: Doing all the different things that we were doing the uploading of a tax returns so that the adviser doesn’t have to enter data that didn’t really exist. There were some tax planning software out there like the modeling side of things. One of the things that really got Roger and me excited about this about focusing on tax planning, a plug for the T3 survey that they do every year, it’s a great survey. Thousands of advisers submit the survey. In tax planning software what we learned, this was two years ago now 2019, less than 8% of advisers were using any kind of tax planning software, less than 8% percent. That number we’ve learned might have been a little low. It still wasn’t more than like 10% or 11% before we started. We’re starting to get that number up quite a bit. But before we launched, advisers were using Excel. Now it’s almost impossible I feel like to use Excel. There are just too many nuances in the tax code that you can’t build and maintain an Excel spreadsheet that can manage all this.

When I was helping run my firm, we were using Excel. It was one that I started to build and then our team kept adding to it. I can’t imagine now though, maintaining that. But I think when we started that our biggest competitor was really folks using their own manual process that they created in a combination of Excel, and Word and email to produce that client deliverable that we’re able to produce. And now we’ve combined all that into a software and you don’t have to enter any data to get it and you can get it in a matter of seconds.

Meb: Yeah, I mean, it seems like the state of many advisers, there is a disconnect between the sort of accounting CPA tax and the traditional planning, you know, plenty of them do it. Plenty of big companies have it in-house both. But very often it’s like two separate hands dealing with something that you really need to be holistic, you need to be talking to each other. Otherwise, you have what I described earlier with my family where mistakes are made, and potentially very large ones. And the old way of doing things seems, you know, in 2021, very antiquated, at least,

Kevin: Yes, the old way was really you relied on if you were doing any tax planning and suggesting some things that the client could do to save some money on taxes, either this year or next year, you were relying a lot on the client to make sure that it gets executed and filed the right way with their CPA. I think being able to use software now and being able to show the client very clearly what you’re proposing. And then getting that CPA in with you early in the process I have found is really beneficial. One of the things that often comes up from folks that see the software, we do demo webinars and things like that, a question we often get is, “Is this stepping on the toes of the CPAs for my clients?” Because we’re doing these forward-looking projections potentially? And my answer is consistently, “No,” because one, the CPAs aren’t doing this work typically. They are so busy making sure that all the tax preparation gets done on time. That’s exhausting. And there’s not just one deadline, everybody thinks April 15th is the only deadline. There are multiple deadlines throughout the year for these CPAs because most of them are doing business tax returns as well, filing extensions, all kinds of stuff.

So the CPAs are primarily busy looking backwards, looking at the prior year, and making sure everything gets reported to the IRS correctly via the tax return. Only typically when asked are they going to do any kind of forward-looking projections for a client. And when they do, they’re going to charge their hourly rate. So that’s really where advisers can step in. And what I’ve been doing for many years now, as an adviser, I take on that role as part of my fee structure to provide that forward-looking planning, projections, and opportunities and then bring the CPA in with me to make sure that they agree with it, allow them to provide any feedback, if they disagree with it, kind of have a debate if it’s something that might be nuanced. The benefit there too, you’re build the relationship, I think, with the CPA, but then the client as well views as they’ve got now this finance team, not just an adviser that does this stuff, and then a CPA that does this stuff, and they’ve got to be the quarterback of the whole thing. They see you working together as a team. And now they feel like they’ve really got multiple people looking out for them and making sure everything gets done and executed the right way and that they’re optimizing their tax situation.

Meb: How have you guys done all this? You just coding this in your basement? Tell me a little bit about the team. I know you guys won some awards at some conferences. How is this bootstrapped and built?

Kevin: Definitely bootstrapped and built. We won the XYPNs competition in September of ’19 with really…I mean, looking back at what the product looked like, then we were out of beta, but it was whatever that next term is. It was definitely still not anywhere like what the product is today. To get it to that point and even beyond. So Roger is a coder as well. So he was an adviser. But before he became an adviser, he was in the software industry. He knew how to code. He’s still very, very hands on in the code. And he does a lot of that work. But now we build out the development team we brought on. We really started to grow after that Fintech competition win and Roger was on. Well, Michael Kitces was a judge in that he helped spread the word a little bit as well with that win. So we really took off after that. And we hired a CTO shortly thereafter. And we’ve just continued to build the development team out from there.

So we’ve gotten now more hands on it. We build out a support team since then as well. We’re now up over 1,700 firms using it. So that’s a multitude of advisers on top of that. And we’ve got some large firms in there as well. So we’ve definitely grown quite a bit, support team, development team. But Roger is like I said still very much in the code. And that’s really beneficial for things like the American Rescue Plan Act or the CARES Act. When you have someone like roger that knows planning knows taxes, and then can also either direct when it makes sense to direct coders or dive in himself to implement, that saves a tremendous amount of time. And I think that’s…well, I don’t think, I know that’s a large reason of why we’re able to turn things around so quickly, not just around legislation but when subscribers provide feedback, give us suggestions. We turn that around really, really quickly. It’s a combination now of it definitely started bootstrapped and it has moved now to building out a team, but we still got some of those bootstrap elements involved.

Meb: We’re in 2021 first quarter, almost tax time, though, it got pushed back, I think a little bit this year. A lot of moving parts, as always. What do you see sort of as you look at the horizon, the future for this company? Is it just sort of blocking and tackling growing the user base? Are you trying to raise VC money and take over the world? How’s the biz dev future for you guys look like? What’s next?

Kevin: We still have a very robust road-map of things we feel we can do on the tax planning side. We still have things we can do to help advisers that have business owner clients, for example. You can do a fair amount for business owner clients, but we’re still not reading in everything, for example, for your business owner client. There is a tremendous amount of things we can do that’s tax planning, or around the fringes of tax planning. Maybe it’s cash flow planning from the tax return, for example. We’re going to keep focusing on the product, focusing on building a product that our existing subscribers and the folks that are prospective subscribers are telling us that they’d like to see. We’re definitely trying to think big in that tax planning software space. You know, I mentioned the T3 survey, for example. The 2021 just came out, it looks completely different than the prior year.

Now tax planning software has been adopted by more than 20% of advisers where it was before less than 10%. Now we went from not being in the survey last year to being the market leader in that space. But it’s still 8%. So I think we’ve got tons of room to grow, both on the business development side you were mentioning. So we definitely obviously want to keep adding subscribers and keep spreading the word about how advisers should be doing tax planning for all their clients as well. That’s the other thing we’re trying to change a little bit, to be honest, is that I think a lot of firms out there because tax planning was very time-consuming. I’ve known of a lot of firms that basically made the decision out of resource constraints to only do tax planning for some of their clients. And maybe they identified the ones that they thought could use it the most or however their criteria was. In my view, the ideal world is you’re doing it for everybody, because you just don’t know if someone who maybe you didn’t think had any tax nuances actually does. The example you gave that carry forward loss that didn’t come through. If you’re not reviewing the tax return and doing it and knowing your client’s tax situation really well, you’re going to miss out on those things. And honestly, it could be so much more impactful for someone that you thought wasn’t going to get much out of tax planning than it is for maybe super high net worth folks that maybe the opportunities might save more dollars. But those dollars might be less impactful to their overall well-being then someone that maybe doesn’t have a high net worth, but could really benefit from saving some tax dollars.

Meb: I’m excited for you guys to launch a retail version in a few years. I love the idea that I first of all, I shouldn’t be doing my own taxes. But having seen some of the mistakes the CPAs make, I definitely need to get one to at least be a few layers. By the way, if you’re the world’s best CPA, email me, I may be your new client, listeners. I need some help. I can guarantee you one thing though, I’m a huge pain in the ass as far as tax returns.

Kevin: Emails are coming in, flowing in right now after that endorsement.

Meb: We’ll do a case study and record it on the pod of all the dumb things I’m doing. I mean, it’s frustrating for me, taxes are so needlessly complex. I mean, I get a letter from the IRS. And historically haven’t had that complicated of a tax situation. But increasingly so and we’ll get these letters from the IRS consistently every year, there’ll be just like you owe $2,000. There’s almost no documentation and I’m like, “I have no idea if this is accurate or not.” It’s if you could wave a wand and make your changes to the tax code…I’m not going to hold this to you. This is not the view of Holistiplan. This is the view of Kevin specifically. What would you do? Any general ideas, any thoughts from someone who has spent a lot of time in that world?

Kevin: I appreciate the disclosure, certainly not the view of Holistiplan or even as myself an adviser necessarily because this would be to the detriment maybe for business but wave a magic wand. Man, would I make it far more simple to do your own taxes, simplify the tax code tremendously. It seems like there was a wave of folks wanting to do that five, six years ago, and it certainly didn’t come to fruition then. It’s just getting worse now with some of the most recent legislation. It is becoming more and more difficult for a human being that is busy doing other things, family, work, to be able to do their own taxes and figure it all out, just even to do the filing of is hard, then to take it to the next level and understand if you’re actually even optimizing it or not, if you are paying too much, or too little, that whole process is very, very difficult for I feel like…again, it’s difficult for advisers to figure out, and we train in this stuff and go to seminars about this stuff. And it’s hard for us to do on our own. So I would completely streamline the tax code if I could wave a magic wand and make it so much easier. The whole concept is a little strange to me that you kind of at the end of the year, you have to tell the IRS via forms, hundreds of forms, in some cases, how much you think you owe in taxes to them. And then they get to tell you whether or not you’re right or not.

Meb: I forget which country that does it. And I’m sure there’s more than one. But in many countries, they send you the essential tax that, “Hey, this is what we think you owe.” And if you think it’s okay, you just sign it and move on with your life. And that seems from a pure GDP wasted worker hours standpoint, so much more reasonable than forcing people to do it on their own. It creates a lot of stress and anxiety. Like most people I know, they don’t want to cheat their taxes, it’s often I feel like they just don’t understand. And even going through the frigging TurboTax it’s like the amount of jargon that is required to understand even what people are talking about in the actual survey is so ridiculous that you can’t even…and I consider myself a financial professional. It’s complicated, anyway.

Kevin: Yeah, I think most people want to pay what they are supposed to pay. But trying to figure out what that number is, is very difficult. And I also think people don’t want to necessarily pay a whole bunch more than they have to either, because then that doesn’t feel great either. Again, to figure all that out is really, really hard. Now even advisers that are trained in it really can’t do it without software at this point.

Meb: The U.S. government ineptitude is good for your business. So we can go long, Holistiplan and short politicians for probably a few more decades. I don’t see this changing anytime soon.

Kevin: And long for CPAs and long for advisers and everybody else in this space.

Meb: But I’m not long TurboTax, they’re literally the worst. Sorry, Intuit. If you want to sponsor the show, I apologize because we’re going to have to cross you off. Kevin, this has been great. What’s been your most memorable investment? Does anything spring to mind from your career as both an entrepreneur, investor adviser, all that in between?

Kevin: I’d say it’s in giving myself the opportunities to take some chances and some risks. I think I’ve mentioned, I’ve done a couple career changes here. I wouldn’t have been able to do that if along the way, years prior to those, I was setting myself up both from, I guess, an educational standpoint, and also a financial capital standpoint, to be able to take risks because then being able to take those risks those have been really good investments as well. I’d say that’s one of the most memorable on the downside. To be honest, one of the worst investment decisions I made was when I’d left lodging and went into telecom, I did it as the bubble was bursting. And I think yeah, it was 2001. So bubble had burst, but I was catching a falling knife, basically. And again, wasn’t a planner yet, I knew a little bit about financial planning and finances, but obviously not enough because I thought I was smart and I loaded up a whole bunch of money in my 401k and the company stock. And then nine months later it went bankrupt. I was in my 20s. Wasn’t having a lot of money to worry about at that point. But that was certainly an example of where I made a big mistake in that regard. So that has always stuck with me as a memorable negative investment decision that I made and certainly one that all I needed to probably have done is read a couple books or read one book that says, “Don’t invest in your company’s stock in your 401k plan,” and it would have saved me some money.

Meb: That is sound sage advice. Investors, they want to find out more what you guys are up to, where do they go? Where do they follow along with y’all’s writing your blog posts research and they want to sign up, where do they go?

Kevin: holistiplan.com clean and easy approach again, sign up for our newsletter there. You can watch the demo there as well. You can sign up for a free trial and try it out yourself. That’s one of the things Roger and I believed in from the very beginning is as advisers that are purchasing software, because we’ve done that with our respective firms really don’t know what you’re getting into entirely until you play around with it a little bit and you get to see it with your own clients’ specific situations. So that’s why we’ve made it really easy to sign up. No risk seven-day free trial, holistiplan.com is where you would go or if you’ve got questions, you can email info@holistiplan.com.

Meb: Awesome. Kevin, this has been a blast. I look forward to following along with what you guys are doing. Thanks so much for joining us today.

Kevin: Yeah, thank you Meb. I really appreciate the invite. It was fun talking to you.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at feedback@themebfabershow.com, we love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.

 

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