The many provisions of the SECURE 2.0 law create an opportunity for fintech companies to help financial advisors get through tax season.
The latest comes from eMoney Advisor, which has added new features to its financial planning software that allow advisors to show the impact Roth conversions and other tax strategies are having on plans. A new tax bracket report overlays a client’s tax bracket floor with their annual income tax base and the taxable portion of any Roth conversion, while an automated Roth conversion tool bracket-based quickly converts assets until reaching the breakpoint between marginal tax brackets.
Roth conversions are front and center for advisers as they navigate changes brought about by the 92 provisions included in the SECURE Act 2.0, the comprehensive retirement savings legislation signed by President Biden late in the year. last year, according to Josh Belfiore, eMoney’s director of advisory products.
“These new features make it easy for advisors to have dynamic tax planning conversations with their clients,” Belfiore said in a statement.
The new tools are available in eMoney’s cash flow-based planning dashboard, Decision Center.
eMoney too updated its software to reflect some of the changes in SECURE 2.0, such as the increase in the age at which individuals must begin taking the required minimum distributions to 73 in 2023 and then to 75 in 2033; Roth funds in a qualified employer plan are no longer subject to RMDs; and catch-up contributions to an individual retirement account indexed to inflation.
The Fidelity-owned financial planning firm isn’t the only fintech aimed at helping advisers keep up with changes to the tax code. For example, FP Alpha provides a Roth Conversion Simulator that identifies the quantity to convert, when to convert, and its value.
“Tax law is constantly changing and it’s difficult for advisors to keep track of what’s changed and what year comes into effect,” wrote Andrew Altfest, founder and CEO of FP Alpha, in an email. Fintech can help advisers keep pace, he added. “[FP Alpha] has data for every year and it is updated to include new legislation, however [we] ensure that it applies only to the relevant years when it will actually come into force according to law.
After five years of rapid IRA expansion, the sharp market decline in 2022 is expected to put pressure on IRA rolling balances in 2023, said Shawn O’Brien, managing partner at research firm Cerulli Associates. That, combined with the SECURE 2.0 Act, could result in high net flows to companies’ defined contribution plans, O’Brien said.
“In addition, the auto-enrollment and auto-escalation provisions in SECURE 2.0 and ongoing legislative and trade efforts to expand workplace pension plan coverage could facilitate stronger contribution growth in years to come. to come,” O’Brien said in a statement.
This gives some momentum to Vestwell, the digital record-keeping company that helps financial advisers offer workplace retirement programs to small and medium-sized businesses. recently in partnership with the Carson Group on a new offering to help advisors expand their ability to offer 401(k)s.