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By Holly SwanExecutive Director, Advisor Institute

While many prospective clients will know this popular real estate phrase, they might not realize that "location, location, location" is also a crucial consideration for their investment portfolios. The After-Tax Advisor® can attract prospective clients by helping them understand this tax tenet: "Asset location can be as important as asset allocation."

This tenet may resonate even more during election season, as local and state ballot measures and election results can hit closer to home than federal measures and results. Those local impacts can be reflected in a prospective client's municipal bond exposure.

During election season, consider asking your prospective clients these three questions to help illustrate how owning the right asset (asset allocation) in the wrong account (asset location) can have unintended tax consequences.

  • "Do you mind if I ask you a few questions about your municipal bond allocation?" This is highly deferential and a great way to start.
  • "Has your current advisor explained why municipal bonds tend to yield less than taxable bonds of similar maturity and credit quality?" This allows you to discuss tax-equivalent yield.
  • "Has your current advisor explained the importance of asset location regarding municipal bonds?" Prospective clients might not fully appreciate how the location of bonds in their portfolios might influence investment return.

By asking these probing questions, you can open the door to a timely conversation about the benefits of a diversified laddered municipal bond strategy in a rising interest-rate environment.

Bottom line: Explaining why asset location is as important as asset allocation can turn election season into new-client-attraction season for After-Tax Advisors.

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