Blucora, the technology company that acquired tax-centric broker/dealer H.D. Vest last year, has partnered with Legg Mason’s Financial Guard to provide automated advisory services to its tax preparation software customers. TaxAct customers will have the first go at the robo platform, and the company will introduce the platform to some 4,500 H.D. Vest advisors next year.
This tax season, TaxAct will offer filers a personalized financial assessment based on their tax situation. Through Financial Guard, users will then be able to open automated advisory accounts for IRAs and taxable investment accounts.
John Clendening, president and CEO of Blucora, said the firm’s advisors haven’t expressed concerns that the do-it-yourself offering would be competitive. Rather, Clendening believes it will be incremental.
“Not only will we connect TaxAct clients with a DIY solution that uses the Financial Guard technology, but for those that prefer working with an advisor, we’ll also connect them with an H.D. Vest advisor,” he said in an interview with WealthManagement.com.
He also expects it to be a lead generation opportunity for advisors. TaxAct currently has 5 million customers.
“If you look at the folks who choose DIY initially, it’s sort of a nursery, if you will, for H.D. Vest advisors,” he said. “What I mean by that is, you have a large pool of folks that, over time, are going to see their needs get more complex.
“They realize, ‘My financial situation got a little more complex here. I’d like to work with an advisor, an expert that I can talk with, in-person ideally.’”
And once the technology is made available to H.D. Vest advisors, it will allow them to serve smaller clients that they wouldn’t otherwise serve because they weren’t profitable.
Blucora chose Financial Guard over other robo advisors because it was the most flexible in allowing full product integration within TaxAct, Clendening said. For example, customers will be able to fund their investment accounts through the tax refund. Financial Guard was also willing to keep the minimum account size low. Other important features included tax loss harvesting and well-diversified portfolios that use low-cost index funds.
Baltimore-based asset manager Legg Mason announced plans in July to acquire Financial Guard for an undisclosed amount. At the time, Legg Mason said it intended to offer Financial Guard to independent broker/dealers and regional brokerage firms as a cost-effective way of handling small IRA accounts. The purchase was also intended to help its distribution partners comply with the Department of Labor’s fiduciary rule.
