On this edition of the HABU Accelerator Podcast, I sit down with Vince Nelson of Arno Wealth to discuss tax-efficient investing strategies. Vince introduces the Wildlife Fund, an innovative opportunity combining conservation impact with potential tax write-offs.
We explore the importance of personalized, tailored solutions for clients when crafting investment strategies. From 401k profit sharing to managing large investments, his steps emphasize a cohesive, proactive approach.
Vince underscores treating offerings as customized for clients rather than one-size-fits-all. This episode offers practical advice on mitigating taxes through high-touch client care, strategic planning for high-net-worth individuals, and onboarding processes.
SHOW HIGHLIGHTS
- Vince Nelson, the managing partner of Arno Wealth, introduces the Wildlife Fund, which combines conservation efforts with potential tax write-offs.
- We discuss the importance of personalized client care and creating tailored investment strategies that align with individual risk tolerance and goals.
- The role of managing partners in coordinating tax mitigation strategies with CPAs is emphasized, highlighting the need for a collaborative approach.
- We cover the necessity of bringing together various professionals to create a comprehensive tax plan that leaves no detail overlooked.
- Vince explains the onboarding process for clients, underlining the importance of early engagement and a proactive stance in managing tax strategies.
- Investment opportunities should be viewed as bespoke solutions tailored to clients' needs rather than as one-size-fits-all products.
- The Wildlife Fund is highlighted for its role in conservation and providing tax benefits, serving as an example of a unique investment opportunity.
- Vince outlines various tax mitigation strategies and investments, such as 401k profit sharing plans, defined benefit plans, and even investments in jets for large-scale investors.
- We delve into the complexities of managing high-net-worth individuals and the proactive measures necessary for their strategic financial planning.
- The importance of CPAs having a trusted wealth management partner like Arno Wealth is underscored, as they provide strategic and customized solutions for clients.
LINKS
GUESTS
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Vince Nelson |
TRANSCRIPT
(AI transcript provided as supporting material and may contain errors)
Jeff: Well, hello again everybody. This is Jeff Pawlow and I'm the president of the Engineered Advisory Family of Companies and your host for the Advisory Accelerator podcast, a show that works to help CPAs become more advisory-minded in their individual practices. On today's show, I'm happy to welcome back our friend, Vince Nelson, who is the managing partner of Arno Wealth, who's going to help us navigate the incredibly complex world of tax-efficient investing as CPAs. I'm sure that you've got clients that are high net worth individuals or maybe have had a liquidity event and they're turning to you for advice in the areas of how to mitigate some of the tax related to those issues. So I'm really looking forward to today's conversation. Vince, welcome to the Advisory Accelerator Podcast.
Vince: Well, jeff. Thank you so much. It's an honor to be with you.
Jeff: You know I'm excited to talk with you because your presentation had such an impact at the Haboo Conference last year and for those who are listening that weren't at the conference, Vince introduced one of the products that they have that's called the Wildlife Fund, and I was just fascinated about how a program like that could allow an investor to kind of do good from a society standpoint but also help mitigate some of the taxes involved with a liquidity event that maybe they've had or just perhaps they're high net worth individuals.
But it was fascinating to see how that particular product was developed and came together. But then I was even more impressed with you, kind of saying like hey, if it fits it's great and we can talk about it. But this doesn't necessarily. It's not one stop shopping where we've got a single solution we're trying to apply across all of our clients. And then you went on to talk a little bit about all the different things that are available through Arno Wealth. So as we jump in today, let's speak to those CPAs that perhaps don't have a wealth management practice or a defined wealth management partner a defined wealth management partner and at the same time have clients that are turning to them for this type of advice and are looking to do something other than just refer it to Merrill Lynch or Edward Jones or something like that. So, Vince, let's start out. Recap for me just all the cool things that make up the Wildlife Fund.
Vince: Yeah, and before I do that, jeff apologies, but housekeeping rules that our compliance department requires me say just a couple of things that are very boring, but I'll say them quickly so we can get them out of the way that basically, our broker dealer and our registered investment advisory services are cleared through RTA wealth management and RTA wealth advisors. Securities offered through RTA wealth management, and which is a FINRA and SIPC and NFA affiliated entity, investment advisors services are also offered through RTA Wealth Advisories Services LLC, a SEC registered investment advisory firm. So basically, just to clarify too, we're going to talk a lot about tax mitigating investments today and anything that we discuss always I defer to those CPAs who are magnificent, understand the tax code. You're the professionals in the area of how to apply the tax code. We are just offering tools to be able to have that discussion. So that out of the way, of course, anything I talk about is not a recommendation, as an answer really to what you said earlier, jeff, it's about getting to know each client, because each client situation is completely different from the next, and how they feel about risk, what their goals are.
All of those things factor into the investments. But to answer the wildlife question, so down in San Antonio, texas, there are the wildlife partners. Texas is an $8 billion industry with exotic wildlife, so these are often animals that are endangered, in large part because back in 1999, the United States government said that they would not allow any hoofed animals to enter the country because of hoof and mouth, and so because of that, in short, basically what happened is you have a limited supply in the US and then they've also been hunted in Africa and to the other world, so we're able to actually start working with conservation and also to help basically with, you know, doing tax write-offs. So, but it's not a for-profit or a nonprofit entity, so it actually is an investment that you can invest into, get a nice return and also write-off this year, potentially up to 70% of your investment.
Jeff: Yeah, I know people were fascinated by that as you kind of told the story. And you know some of these magnificent animals that are endangered, you know being able to contribute to their longevity and their conservation and what have you, but then also doing that in a way that's going to help mitigate some of the taxes that you're facing. It seemed like there was great alignment between kind of social activism and investment strategy, given that they had, you know, an incredibly high tax burden that was coming due. So I just recall the number of people that were lined up at the booth to speak with you after your presentation and you know, I think if they had their druthers, we'd still be there in Dallas answering questions. So that's one of the things I've been happy with is just kind of the care that you take with clients in terms of really trying to understand what solution fits best for them. So talk a little bit.
You know, if I'm a CPA, there's a little bit of risk, obviously, to introduce my client to you. I've got a good thing going. I prepare the returns every year. Maybe I'm doing some kind of assurance services that are an annuity. The last thing I need is some guy coming in here and screwing up the investment. So then I not only lose the goodwill associated with that, but I lose my client right. So I've got to be confident in my partner, and one of the things that I've just always been impressed with Arno is just the care you take where one size doesn't fit all. You're not programmatic, you're much more strategic in terms of how you engage the client. So maybe you can speak a little bit to that philosophy and give some examples of other solutions that might fit in any given situation that might fit in any given situation Absolutely, and you know to us.
Vince: We understand the level of trust that CPAs put in us and we also understand that their client is at risk you know with any professional that they connect with, and so because of that, we will follow the lead of the CPA very closely, along with making sure that anything that we do for the client is in their best interest, which a lot of times people think that we just need to know what their tax liability is, whether it's ordinary income or capital gain situation, and then they just want a quick solution to be able to write that off. But we have to go much further in terms of understanding who are they as an investor and what is their asset stock. Are they accredited, making $200,000 as an individual, $300,000 a year as a couple? Or do they have a million dollars worth of assets, not including their home? Or there's another level, a qualified purchaser, which is $5 million of assets or more, where we can do even more creative things. And then, are their assets protected and what kind of strategies do we need to look at? Holistically with a team? So we typically will work not only with the CPA, we will work with so estate planning attorneys, sometimes tax attorneys when tax opinions are needed. So there's a whole team that we pull together before we even sometimes get to the product.
But once we got there and we start to see what they're interested in, we're going to look at everything, such as if it's on the ordinary income side. You can look at things like oil and gas, which typically and we tend to be very conservative in terms of let me hit the pause button all alternative investments, what are known as Reg D investments, private placements you always carry higher risk than anything you invest in the market. But, with that said, one of the things that we look at is diversification. So we're not going to look at just one investment, but we might look at several different things and see how your portfolio is Going back to that. We'll look at oil and gas as a possible option where you can get up to 85% as a write-off, potentially this year. Again, diversification. So we will invest into oil and gas funds that are not just going to be three wells to five wells, like typical oil and gas investments will be, that have a great chance of super high returns, but they're not diversified, and so we want funds that have 40 plus wells we had one fund last year that had 2,500 wells for diversification and make sure that your income is going to be coming in. The other thing we look at are going to be the bonus depreciation, so you have what's known as the intangible drilling cost of the upfront tax write-off and then on the income you're receiving you get an additional 15%, basically as far as tax-free income. So that's great for oil and gas.
Look at things like the wildlife fund. This year gives you a 70% write-off Income. Is capital gain income A little bit lower for a person if they have a very high ordinary income tax bracket, that can work well. We look at other strategies on the ordinary income side where we refer companies that we do real estate in terms of security transactions to maybe invest into real estate like multifamily or storage transactions, to maybe invest into real estate like multifamily or storage, where we'll refer those companies to engineer tax services, get the cost segregation and they can take the cost segregation and pass it on to the investor.
So a lot of different strategies on the ordinary income side. Capital gains, different situation. Sometimes we can use oil and gas for that different situation. Sometimes we can use oil and gas for that, oftentimes we will use the wildlife fund doesn't work well. For that we will use microgrids as a way to, through a 30% tax credit, 60% bonus depreciation, provide tax benefits that way with returns. And then real estate that's where we can get really creative and we can set up different structure types of 1031s, tenant and common investments mixed in with triple net leases. So again, depending on the investor, we can do a lot of different things.
Jeff: I think that's pretty impressive because every investor's profile is going to be unique and their situation is going to be unique, and again, what I've been impressed with is just how you're able to kind of tailor things that speak to a specific situation and provide these tax efficient benefits to the investors. What is talk a little bit about? Let's, I guess, divide this in two. First, talk about how you might work with a CPA firm who was looking to partner with somebody in the wealth management area. What does that look like in terms of the structure and the organization and what have you?
Vince: Well, typically for CPAs. We've actually partnered with several CPAs through HUBU, great relationships that we love and it depends I mean typically the referral relationships are both ways where they may be referring us clients. But we get plenty of clients all the time that really don't understand these strategies, their CPAs don't, or they're. They have an accountant and they really need CPAs. We find it it's hard to find those, but I always know where to go, look through the HUBU network and so we're often able to bring clients to them as well.
The structure basically we have a whole team, so I am one of two managing partners. Logan Cox is the other managing partner, but our administrative team will work very closely with the CPA. We will work on a tax mitigation strategy for them, whether it's for them individually, for perhaps a family office or maybe it's a business where a lot of these strategies we can use and combine things like a 401k profit sharing plan or defined benefit plan, mix other different strategies in that as well for additional tax benefits, and then you know, and simultaneously to show you the complexity for a very large investor, we're also working with ETS for those clients who like jets and we'll make that a part of the overall tax mitigation strategy, and so it really is. We tend to act as a financial quarterback where I'll take the lead off the CPA if they've sent me a client and we'll follow their lead. But we typically end up bringing all the professionals together, organizing that, not only creating a plan but then doing follow-up on that plan at least semi-annually, if not quarterly.
Jeff: So if I'm that CPA, I can lean on you to be kind of that quarterback and obviously you're a member of. I can lean on you to be kind of that quarterback and obviously you're a member of Haboo and you've you're familiar with all of our different partners. You mentioned the outstanding jet team that we have, but it sounds like you bring a little bit more to the table than just the partners that each bring their own solution. You've kind of elevated yourself at a higher level where you can kind of quarterback. You've kind of elevated yourself at a higher level where you can kind of quarterback and, in addition to the products that are offered through you directly, also tap into the other products that are available in the network.
Vince: That's exactly correct and probably, jeff, the driving force behind that is we're not product people, we're solution people. And you know, from a license standpoint, a series 66 or 65 standpoint, you know we are an investment advisor, which is the highest fiduciary responsibility in our industry and as such, we really have to be able to understand the whole picture. What I found is that from an estate planning attorney, from a CPA, from a financial or a wealth advisor, you will get great solutions, but oftentimes things are missed. But when you bring a team together collaboratively, you can build a comprehensive strategy where they're like well, what about this? And they're like, oh well, we're still missing this piece, and so we really are able to address the whole of that person's need and so, yes, so as our fiduciary hat, if you will, as an investment advisor, because of that, we feel very strongly about really being a quarterback and pulling it all together.
Jeff: So let's say I'm one of the clients of a CPA firm that you're working with and I've been introduced to you. Take me through that. What would I expect to experience, as I kind of got onboarded and you got to know me and my specific situation? What does that look like?
Vince: That's a great question. So I'm going to ask a question that you haven't asked yet, but it typically comes up in that process, which is how fast can you get things done? And the reason why I say that is because we are in the tax mitigation world. A lot of times our strategies we do have strategies that will go backwards to previous years, but most strategies are going to be for the current year. And there are times I was getting calls on the 29th of December to investments and it's not that we can't do them, but we can't do them really effectively and ensuring it really is the right thing for the client. So, unless the CPA gives us a comprehensive overview of everything going on and we are agreeing that this is a smaller amount we're doing this specifically for tax write-off, but we still have to walk the client through the risks and how the investment works and make sure they're comfortable. It's really difficult to do it at the end of the year.
So I say all of that to say how we start our engagement is with a simple phone call with the CPA, first to really understand what the client's need is and what they see, then an introductory call with the CPA and the client and then in that introductory call we'll do our data gathering where we will get all of the information about the client, the tax situation, what's going on, and then we'll build a draft proposal and do a follow-up with what that investment strategy could look like.
The next thing is, after we've gotten that in place and the client understands that, the client understands the fees that we charge and how all of that's structured and they're comfortable with everything. Then we'll go ahead and start to get accounts opened and to the degree that we need to bring in other partners, we will do so, adding it to the CPA if they already have their other partners. That's fine. If I were given a perfect world timeline, I would say in a perfect world we can really deliver a total solution and implement that solution within two months and purchase within a week. Yes, but that is not ideal okay.
Jeff: So let me just reiterate that for our audience, because again we're talking to our cpas and what I'm hearing is like hey, this is going to cut it, for you know, establishing these things and getting it done Not that it can't happen, but it's not ideal and not preferred. If you're a CPA, you know who your high net worth individuals are. You know who your high taxpayers are. You know if anybody in your clientele is expecting a liquidity event, whether that's an inheritance or maybe they've sold a business or something like that You've got a good read on that. Those things just don't come up and kind of come out of nowhere, like you flip the switch and so Vince. What I'm hearing is like, once we know that this is going to be in play, the sooner that we can get them connected with you to start presenting different options for me as a CPA to consider and advise on the better we're going to do in terms of serving the client.
Vince: That's absolutely correct and, jeff, if I may, let me give two real world illustrations to show you how it normally works. Now, tax liability was going to be somewhere in the range ordinary and capital gain. Around 12 million is what they were going to owe, and so there were a lot of moving parts both ordinary income and capital gain income that would be taxed. So what we were able to do in working with their CPA very closely, we found out they liked jets, we found out they liked yachts, they liked real estate and oil and gas was a good one. So we were able to use a combination of two oil and gas investments one opportunity zone investment, and then combined with a jet and a yacht, and we were able to basically take their 12 million tax liability down to 5 million. So we saved them 7 million in taxes. From that plan we're generating about 1 million of revenue for them annually and basically in 10 years they're going to just about double their money through use of this strategy.
Another strategy and here's an example of a complex one that we're working on right now that again a larger one. It's a family office, but they're selling 135 million in real estate. They're a partnership, two brothers, but both brothers invest differently and they don't want to stay together. So what do you do with that? Because if you do a 1031, they're still stuck with each other and their gain on that was $100 million, so their tax bill is about $32 million.
So what we were able to do is to structure a 1031 triple net lease deal with a company that is going to basically with commercially graded paper where they're going to be able to leverage it up to about 85% paper where they're going to be able to leverage it up to about 85%, they're going to be able to take out about $45 million in equity that will be tax-free because it's leveraged money and over the course of a 20-year lease, basically it's going to pay off the debt. There's not going to be a lot of gain left in it, and so basically, they're in a better situation within 90 days of investment, taking 45 million, than if they were paying the tax bill, which they'd walk away with a whole lot less. So these are strategies that take time, is my point.
Jeff: Yeah, and the thing that really jumps out to me there, Vince, is just if I'm the CPA and I'm facilitating this introduction, I'm sure that you're open to them being involved along the way. The amount of value that is created here in this situation is tremendous. So let's start the conversation early and maybe nothing transpires. Maybe they just decide, hey, I don't want to go in this direction, these solutions are not the fit or the risk level that I'm comfortable with. So be it, but you're still the CPA that was bringing these ideas to the table and adding value to the relationship by giving them alternatives to consider and ultimately say yes or no to. But in the two examples that you've provided, I mean, those are significant benefits for the end user.
Vince: And Jeff, to your point, really just to slam it home, I think the CPA, to me and to the clients that I've spoken with, looks like a hero if they're able to bring solutions and options. I would say I don't know what the percentage is I would dare say at least 95% of the CPAs that are out there doesn't mean they don't do tax mitigation, but I don't hear of comprehensive tax mitigation planning, and so to the CPAs that offer those services, I have clients that are asking for those CPAs all the time, so that's a huge value.
Jeff: Yeah, I can imagine, because what we see across the board and this really doesn't apply to the CPAs that come to Haboo, because that's a group that's self-identified, saying, hey, we want to be more advisory oriented and we want to tap into this ecosystem. But for the baseline CPA focused on compliance and at some level I understand that the tax code changes regularly. Now. That used to be generational and now it seems like it's tied to every election cycle. So the compliance job and lift have become heavier, bigger, but the clients are still demanding the value add and at the end of the day, the value is created by lowest tax possible. No black helicopters. I want to pay the lowest tax that I can legally pay and don't want to cross the line and get into any trouble with the service. And what I'm finding is more and more CPAs need help and a trusted partner to help them with that, because the compliance nature of the business has become so cumbersome that we don't have the time we used to dig into some of these planning methodologies.
Vince: Vince. I believe I'm going to.
Jeff: I'm sorry, go ahead.
Vince: I was just going to. Just one more thing that I think would be beneficial for CPAs. So you know, for those who are willing to wade into the water of tax mitigation strategies. Wade into the water of tax mitigation strategies, I find, because I understand the risk that comes with that for the CPAs, but if they have really good tax attorney friends who give qualified opinion letters and qualified opinions on the strategies, that will take the weight off the CPA. So just two cents of advice there. No, that makes all the sense off the CPA. So just two cents of advice there.
Jeff: No, that makes all the sense in the world. Now. You'll be back at Haboo end of July, correct? Correct? All right. So for our CPA firms that are already in the Accelerator community, look forward to seeing Vince again. He'll have a booth. I'm not sure if we've got you on speaking this year, but he'll be there interacting with you and look forward to continuing those conversations. For those of you that are not part of the Accelerator Network but are listening to the podcast, Vince, what's the best way to reach out to you? How do I get in touch with you, because I want to learn more.
Vince: I would say go to our website, which is really simple. It's arnowwealth.com. A-r-n-o. Wealthcom. Or you can email me directly at Vince V-I-N-C-E dot Nelson, n-e-l-s-o-n. At A-R-N-O. Wealthcom.
Jeff: Perfect. Okay, arnowwealthcom is the first step, or email directly to Vince and Vince. I appreciate that there's a lot of our guests that you know we're not going to give out their personal email. Healthcom is the first step. Or email directly to Vince and Vince. I appreciate that there's a lot of our guests that you know we're not going to give out their personal email, so thank you for that. Look forward to seeing you in Dallas.
I want to thank you for everything you're doing for our constituents and encourage the CPAs out there that, if you're looking to be more advisory minded, want to be exploring tax efficient investing. It's not that you're out there selling a product and Vince, you made this distinction clear. It's not a product, it's a solution. You know, have these conversations with your clients and if they decide to do something, that's great. If they are introduced to something and then they decide it isn't for them, equally great. Because you're the person that was the catalyst for that conversation and I promise you, if you do some work with Vince, you're the person that was the catalyst for that conversation and I promise you, if you do some work with Vince, you're going to be exposed to some opportunities for tax-efficient investing that you are not aware of because they just aren't mainstream, and so I look forward to connecting the dots and helping your clients any chance that you get Vince. I appreciate you being with us here today on the podcast and I look forward to seeing you soon in Dallas.
Vince: Thanks so much, Jeff. Look forward to it.
Jeff: Take care everybody have a great day.