Financial advisors have to do more when it comes to smart tax management, as it’s an aspect of advice that clients consider very important, according to a new survey.

Close to 80% of investors believe that advisors must focus on minimizing their taxes, as 90% believe that taxes can eat into their portfolios over time, according to a survey by Orion Advisor Solutions of 2,000 “consumer investors.”

Meanwhile, a Cerulli report published last month concluded that only 20% of advisors use automated tax management, while the rest rely on “an ad-hoc approach,” performing tax-loss harvesting once at the end of the year, Orion says. Such an approach means advisors miss out on opportunities such as those presented during times of market volatility last year, according to the company.

Most advisors see the benefits of focusing on taxes as well: 78% of advisors think that healthy asset allocation and tax management are the two key ingredients to add alpha to clients’ portfolios, while 76% believe explaining the advantages of tax management to a client is easier than the benefits of beating the market, Orion says.

Moreover, 86% of advisors believe that being able to quantify and report to clients the ongoing effect of tax management is essential to growing their practices, according to the company.

Nonetheless, advisors are hampered by time and resource constraints in delivering effective tax management, Orion says. Forty-six percent of advisors, for example, rely on manual methods such as spreadsheets and email to look over models, while 48% are concerned that they could lose clients due to a lack of sophisticated services, according to the company.

Orion says that advisors also face a “self-imposed hurdle” when it comes to outsourcing, with 66% of them believing that doing so would diminish their value in the clients’ regard. But Orion says it found that 90% of investors prefer advisors who tap the resources of other experts for investment research, strategy, planning and portfolio management.

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