An attitudes survey in the US finds advisors are not spending enough time with clients on tax issues and this is hurting their businesses.

Advisors in the US are spending less time talking to clients about tax-related issues and this is having a negative impact on their value proposition, according to survey findings that suggest advisors need more guidance in this area.

Although over half of those polled (53 per cent) said client tax burdens intensified in 2014, dialogue around related strategies declined. Just over a fifth (22 per cent) said taxes have been among the most common topics of conversation with clients so far this year, down from 29 per cent in 2014, according to the latest Financial Professional Outlook by Russell Investments.

“Given clients' increasing tax burdens, one would expect tax strategies to be a major focus for advisors,” said Frank Pape, director of consulting at Russell Investments' US advisor-sold business.

“Right now, many advisors and clients don't fully appreciate the drag on returns caused by taxes, which adds up quickly, especially in a low return environment. Reducing this drag and providing clients with a more complete plan for implementing a tax-managed approach is a significant way for advisors to add value, not only to their own clients, but also their businesses.”

Pape believes that tax management could be a key growth area for advisors. The fact that around a third of client taxable assets (37 per cent) are held away, for example, suggests that those who focus on tax-managed strategies could open the door to these assets.

In recent years, many investors have been keenly aware of government policy and market volatility, which remained popular topics of conversation in this year's survey, he said, adding that “an investor’s personal tax policy is much easier to control than government policy.”

More education, support needed

Meanwhile, it emerged that nearly a third (32 per cent) of the advisors polled are not satisfied with the level of support and education they get from asset managers on tax-managed investing, while an additional quarter were unsure.

Russell said myths continue to persist around who can benefit the most from tax-aware investing, and the range and capabilities of products available to support this approach.

“Many advisors and their clients don't yet realise that there is more to tax-aware investing than muni-bonds and index funds,” Pape explained.

“As advisors gain a broader knowledge of the tax-aware strategies available to them they often find themselves better able to advise and aid not only high net worth investors but also those in the middle income brackets. The first step is making sure advisors receive adequate product education, and the second is educating clients.”

The findings are based on responses from 295 financial advisors.