Dave Spence: Turning Tax Planning into Financial Freedom

In this episode of Canopy Practice Success, host KC Brothers sits down with Dave Spence, a CPA turned financial planner with decades of experience in both public accounting and wealth management. With six years in public accounting, 18 years at AXA Advisors, and 15 years at LPL Financial, Dave brings a unique perspective on the intersection of tax strategy, financial planning, and client advisory services.

KC and Dave explore the “science vs. art” of accounting and financial planning, why tax planning is often the natural gateway to advisory services, and how CPAs can evolve from compliance work into forward-looking strategies that build long-term client trust. They also discuss practical models for firms, whether through certification, hiring, or strategic partnerships, and how collaboration across disciplines can deliver better outcomes.

Along the way, Dave shares his personal journey, his perspective on today’s tax environment, and insights from his book The Tax Pros Guide to Using LERPs for Advanced Tax Planning. From practical strategies to industry trends, this conversation offers inspiration and actionable advice for firms ready to expand their role in clients’ financial futures.


Connect with Dave on LinkedIn: https://www.linkedin.com/in/davespencecfp/

Get Daves book here: https://taxfreetutors.com/

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Transcript

KC Brothers (00:05)
Welcome to another episode of Canopy Practice Success. I am your host, KC Brothers, and I'm here today with Dave Spence. And Dave has a rather unique background, especially relative to a lot of our podcast guests. Dave is a CPA. He spent six years in public accounting, but then spent a lot of time in wealth management. 18 years with AXA advisors, 15 years with LPL financial.

And Dave has some fun things we're gonna talk about today relative to connecting the dots between wealth management and tax planning, which I think also has some fun CAS implications, but we'll get into it. Dave, anything else you wanna offer? Fun hobbies, cute grandkids.

Dave Spence (00:52)
Well, I'm a diehard Steeler fan and a fan of Ohio State. I've got a couple of grandkids, three kids of my own and two grandkids and I adore them as always, as every grandparent does.

KC Brothers (00:55)
Yeah.

Ugh. Yeah.

it's always a good reminder to hear that my mother-in-law and mother do actually, in fact, adore my children. have to be like, okay, it's okay if I need to ask for help. you, again, have an interesting background. You haven't spent a ton of time in...

Dave Spence (01:17)
Comes in handy.

KC Brothers (01:23)
a typical accounting firm the way a lot of our guests have. lately there, I have noticed there's been some whisperings of this connection between wealth management and a typical CPA track. In fact, I was just in Boston last week and met a guy who is a wealth manager, flew down from New York to our event in Boston.

because he wants to expand into CPA services. And I was very surprised because I don't hear it often. Why don't we hear this often, Dave?

Dave Spence (01:56)
Well, the CPA work is very difficult, very challenging. The CPA work is more science than art, if you will. There should be ⁓ one right answer to every question. You know, it's based on law. so it's very kind of scientific and single focused. Wealth management and financial planning. I like to use the term financial planning better, more than wealth management because it kind of covers a lot more than just managing assets.

KC Brothers (02:04)
Okay, yeah.

Dave Spence (02:25)
They can be more artistic, if you will, art and science. And there's several ways that you can skin the cat. You can save up for college in a 529 plan. You could do it in an insurance policy. You could do it with loans. Any which way, there's a number of ways that you can get there. And you have to balance one goal against another goal and prioritize.

KC Brothers (02:30)
I love that.

Dave Spence (02:51)
There's just a lot more artistic aspects to that. And to go from that level into the science, if you will, of taxes, it seems really unusual. And I can see where that would be really challenging. I found it easier, but still difficult to do the reverse. Become an expert on taxes and accounting issues and financial statements and things like that. And then take it to

Okay, what do we do with this information? How's that going to, you know, where can we see ourselves in 10 years, 20 years, 30 years, and what kind of things can we do along the way? And you learn about all the different options and so forth. it was, it was exciting to me to open up the different possibilities and to see how each different person would see things differently and choose different routes. And I can help them along the way with that.

KC Brothers (03:43)
Yeah. Well, it's not uncommon that I do stumble across firms who are doing tax planning. And that's a very clear, I guess, not a big logical leap. We're not connecting too many dots there. Do you see that it's really not that big of a leap from tax planning to financial planning, or is it bigger than maybe people anticipate? how might people, how might you recommend people make that jump and why?

Dave Spence (03:49)
Mm-hmm.

Thank

Well, I think where the industry is right now, and I've always been active in the CPA world, I've past president of the Virginia Society of CPAs, largest chapter right outside of DC. And I've taught literally more than a thousand CPAs on financial planning topics and so forth. So I'm very active and I follow the industry well. And basically the biggest step is to get into the tax planning from tax prep.

And that's where I think the industry mostly is focused right now. Some are doing tax planning and they might want to take it to the third level, which is adding financial planning and do all the number crunching that goes out decades and all that stuff. But more of them, I think, are leaning in toward how do I get involved in tax planning? Now, when you move from tax planning to financial planning,

It's very smooth, I think, because the biggest hurdle that we face in our own financial independence is the taxes. You you can pay a little bit too much in management fees or administrative expenses or, you know, charges in a product, but that's nothing compared to a 40 % bite on the earnings that the tax code can take away from you. So I found that having that CPA background and that tax understanding made everything easier for me.

as we went forward and I focused a lot on the tax aspects of every financial planning move.

KC Brothers (05:32)
as I see things and I've spoken to lots of CAS professionals and it's funny, there are different levels or different interpretations or you're on your journey to becoming comfortable advising, which really is that the mentality you're in as a financial advisor, as a wealth management and professional.

Dave Spence (05:40)
Okay.

KC Brothers (05:53)
I loved your designation of science versus art. think that maybe takes away for me at least, potential opportunities to feel major imposter syndrome. That it's, it's, there's just this creative aspect to it. You've got the foundational and understanding there isn't necessarily one right way or one wrong way. And yeah, you'll still learn as you're advising clients and find new creative ways, new

executions, within the profession. But with CAS firms, again, there are different levels as people are maturing or entering into or maybe even levels of confidence in getting to that advisory. And I love this connection because taxes are so mythical, I think, to especially non-professionals. And then to your point about looking ahead,

10, 20, 30 years. I can't do that as an individual. I can barely wrap my brain around what to do right now. And in fact, I remember I had a few things personally that I was like, okay, as soon as these things are taken care of, I'm gonna get a wealth manager. And I did, the instant I did, he laid out his models and said, hey, here's what your financial situation, your future financial situation would look like.

Dave Spence (06:42)
you

KC Brothers (07:03)
status quo without you having, without me investing for you. And then he showed us the model afterwards. And instantly, all of my future anxiety about our financial situation was taken away. I'm like, we're actually doing better than I thought. And it was just such a relief. I'm no complex client. I don't have businesses and real estate properties, but I think...

Dave Spence (07:16)
Ha

.

KC Brothers (07:25)
if that were ever to be the case, like all of these things become strategies I would want to take advantage of. Is it common that these types of clients also are like, but you're my accountant, can't you just do it? Or is it just so common that these are so separate?

Dave Spence (07:39)
No, it's very common. think the public in general is a little bit misled as to how much they're getting from their CPA or their EA and how much they're getting from their investment advisors. For example, I talk a lot about the national debt being so high right now.

relative to the gross domestic product, which is how they measure it to see if it's out of whack or not. It's at about 130 % of GDP. And the target over time is between 40 and 70. And we're at 130. The last time we were over 100 was right at the end of World War II, where it was at 120%. And between 1945, I mean, immediately they raised the tax rates back then to start paying down the debt.

From 1945 all the way to 1985, tax rates were 50 to 100 % higher than what we're looking at today. Even adjusting for income inflation and all that stuff. My father was a steel mill worker. He was in a higher tax bracket than I am today. It's crazy that that's what they had to do. And now we're in the same bucket and we're not raising rates, we're lowering them. We're extending these cuts and so forth. And we're printing money like crazy.

Our debt is at $37 trillion. That's like a credit card that we only pay the interest on it. We never pay the principal. So it's just going up. It goes up at the pace of about a million dollars every 40 seconds. And we just keep refinancing the debt. And as interest rates go up, we refinance treasuries that we're paying 1.5%, 2%. Now we're refinancing the 3%, 4%, and 5%.

it's going in opposite directions. Our income and our expenses are going in opposite directions and we're not doing anything about it because they won't get reelected if they say they're going to raise tax rates or they say they're going to cut entitlements. 95 cents or so out of every dollar raised goes to four expenses out of the budget. That's Social Security is first, Medicare, Medicaid is second. Interest on the debt is now the third largest.

And that doesn't get us anything. It's just paying the interest on previous spending and then the defense budget. So you tell me where we're going to cut all of our expenses and balance the budget without raising taxes. I preach to people that, you know, taxes are your biggest financial planning challenge and the tax professionals need to be doing more planning. So let's get busy and let's start doing this and let's collaborate.

you know, hook yourself up with a wealth manager, hook yourself up with an insurance expert. And then you do the best thing for your client and you basically sit on the same side of the table as your client and you're protecting them. And would they love that or not? Of course they would. You can ask tougher questions than they can ask and you can grill the advisors and you can make sure the plan makes sense and you can kick the tires on it and you can run it by

other experts if necessary, legal experts and so forth. The collaboration is important and you got to find somebody you can trust.

KC Brothers (10:45)
as you were talking about that collaboration, I've had three modes of execution. Either the accountant gets certified and they add that additional expertise to their bucket of expertise. They hire someone on staff or they refer out. They have a partner and then have some sort of referral rate bonus payment, right?

Are you a fan of any, is there a fourth that I'm missing? What are your thoughts on structuring that logistically with the firm?

Dave Spence (11:13)
Well, you described pretty well the three options and they've almost always gone with the third. They will refer people away. And we were taught in CPA school basically from that on and through the profession over the years. Refer people and refer them to like three different people. You want to be independent. You want to be objective. You don't want to be on the hook for somebody giving them bad advice. And that all makes great sense because I've been now, I've been on the

KC Brothers (11:18)
Mm.

Dave Spence (11:39)
financial services side of the business for 35 years as a CFP. there's 90 % of them are bad. 90 % of the financial advisors out there, I would say, are bad. When I say bad, they might mean well, but they're just selling limited products. They have limited knowledge. So it's really hard. And I don't blame people for kind of running from that and keeping an arms length. So they refer people to other

advisors and you know, if you have dinner with them and you know, get tickets or something like that, you might send more business. Everybody plays that game. I think you should work as a team. You should be the quarterback because the taxes are the biggest issue. The business itself, if you're dealing with business owners, produces a lot of opportunities for planning. So you should be working with the team and you should be the quarterback rather than referring them away and and

keeping your distance. I think you need to get involved and help manage and your clients are going to love that and they're going to get the best work and you're going to see when somebody doesn't know what they're talking about. So you're going to make sure that the best stuff happens. If you want to pursue a CFP after that, like I did, that's fine. If you want to hire people into do the asset management, that's fine. But you need somebody that does all the bases and you know, a lot of the investment advice out there, the wealth management.

is focused only on the assets under management and not any insurance stuff. They say we don't touch insurance with a 10 foot pole. That's not the best thing for your client. There are guarantees that you can get for your clients that only insurance companies can provide. You can get protection against market losses. You can get death benefit guarantees and long term care benefit guarantees and all that stuff that an asset manager is never going to be able to provide you. So you want to be open to that.

and collaborate with a bunch of people. And you'll learn a lot of great stuff along the way too. That'll help you and help others. And your clients are gonna love it and they'll pay for it.

KC Brothers (13:37)
I couldn't agree more with that last statement in particular because I think, and you tell me with your years of experience, but I think this is in general customer behavior. Customers often don't always know exactly what they want. They know what they know and they don't know what they don't know. And no matter the industry, no matter the service, no matter the product,

Dave Spence (13:56)
Right.

KC Brothers (14:00)
There is a level of education that you need to do called marketing, pretty much, or even a snail's call, right? Like painting the picture, connecting the dots. And a big theme for me lately in accounting has just been with the entrance of AI. And even a year and a half ago when 3.0 came out, one of the first use cases was on a tax return and it did a basic tax return pretty well.

Dave Spence (14:07)
It is.

KC Brothers (14:26)
it's just going to get better and math is math and we can probably see, you know, gap principles executed on with a high amount of accuracy as the coming months and year or years, you know, come up. But, and that pushes us into this big opportunity of advisory because AI cannot do two big things, critically think and build relationships.

And as you're tying out this, especially as you called out the referring away, get your point too, and your observation of why professionals don't want to be beholden to risk that might come with the financial advisory aspects to this. But that relationship, like that relationship is so crucial, so advantageous, like you already have it.

And if you're providing them with a great experience already, I guess I should say you've sold me. I'm no CPA. I can't go and execute on this tomorrow. with all of the trends and movement I'm seeing in the market, I'm picking up what you're laying down with the opportunity here of stepping into financial advisory.

Dave Spence (15:20)
Yeah.

And I, you know, it was a rude awakening when I did it. had, you know, six years I was charging people by the 15 minute block, right? nobody wants to do that, but you know, they listened to everything I said and, know, I got to believe in everything I said. No, I mean, you, could get the answers, you know, I could turn to my

KC Brothers (15:42)
Yeah.

Dave Spence (15:51)
partner in charge and managers when I left all of that and I pursued the CFP and I got onto the product side of the business, because back then you couldn't do any product stuff as a CPA. you know, I jumped. That means I could sell an insurance policy or I could put somebody into an investment account and I can manage the assets. You know, I had I got all the licenses for that. I got all the training for that. I got all the credentials and.

KC Brothers (16:03)
When you say product stuff, what do you mean?

Dave Spence (16:17)
people still wouldn't trust me because I was paid differently now. I had to work with that and I had to convince myself that I'm helping them first and foremost. And if I do that, then it's a win-win situation. And I had to sharpen my communication skills and make them understand and trust me that this is the best thing for them. It's not the only thing, give them options and all of that stuff.

KC Brothers (16:19)
Hmm.

Yes.

Dave Spence (16:44)
I was helping people and then it became easier to maintain the relationship, to dig deeper and find out what they think is fast or slow or big or small or aggressive or conservative. Everybody's a little bit different and you get comfortable with feeling them out at some point and then you just want to do more of it. And it's very exciting because this is the stuff that AI is never going to replace. You need to get in there and understand them.

KC Brothers (17:07)
yeah.

Dave Spence (17:09)
and then do the right thing for them.

KC Brothers (17:12)
when you talk to you about what

clients want, I have this requirement of my financial situation is beyond my ability, right? I need you to file my taxes. I need you to do my books. I need you to run my payroll. They'll hit a threshold that is the catalyst for having them reach out to an accountant.

Dave Spence (17:22)
Mm-hmm.

KC Brothers (17:33)
And again, like what I said with, it's not uncommon that customers in general don't know what they don't know and therefore don't know what they could or should want or what is available to them. I love that you hit on communication. This has been a theme recently for me that I've really kind of latched onto with advisory. And again, this insertion of AI in accounting and what it might do to impact accountants work.

one of the biggest things and challenges it's going to do for accountants is force them to learn how to communicate better, to manage a relationship better, to elevate beyond numbers. once you master that skill, I really don't think, I mean, and here I am, I'm like spectator commenting on the professional players on the court here.

don't think it's that hard to make a three-pointer from half-court, but I don't think it's that much bigger of a leap. Once you've mastered that communication aspect of, and that, you're getting into the arena of selling, of communicating value, of distilling things down simply into a language that they understand and not the language that you default to using. And that, I think, is like the biggest...

Dave Spence (18:20)
Bye.

Mm-hmm.

KC Brothers (18:45)
your next bit of, yeah, biggest turtle. And then your next lowest hanging fruit is this.

Dave Spence (18:45)
Yeah.

Mm Yeah, I agree I became a really good salesman, actually, but it was I never felt like I was selling. I was just my job was to teach. You know, I could go out and I could study all these strategies and rules and products and I could see what was good and what was bad. And I could go and talk to a client and in 20 or 30 minutes get to know them and say, OK, I've got a shelf over here with

KC Brothers (19:00)
Yes.

Dave Spence (19:18)
300 things on it. I'm going to go pull off three of them and we're going to talk about it because of their situation. And I think anybody can do that. If your heart is in doing the right thing and just gathering the right information and putting the pieces of the puzzle together with the help of, you know, whoever you're collaborating with, working with somebody that's that's good, then it's going to be a win, win, win, win situation. You know, the products that are the best are going to win the

KC Brothers (19:23)
Yeah.

Dave Spence (19:46)
the advisors that are handling the products are gonna win, the client's gonna win, and you're gonna win. So, and there's nothing better than that.

KC Brothers (19:54)
I love that you said that you got really good at sales and then even said the word teaching in there. People myself included, there is something about sales that is scary. And I think a big part of that is if you misinterpret sales as being about you. And I do want to bring, know you, in our pre-call, you mentioned that you're retiring.

your wealth management website and moving to another website. But I do want to point listeners to Dave's wealth management website because he's done a few things that capture that First, you are the sole proprietor of Palladium Wealth Management, but your website doesn't read that way. It reads as a we, as our mission, what we can do for you. And I wanted to call that out because again, it makes it...

easier to sell an outcome, to sell a value and not you. And I think that gets us away from those 15 minute increments too. You're not selling your time. You're selling the output that you are delivering. And then I also love, and I'd love to even hear maybe the evolution you had with this, but your services tab. Everybody, this is Dave's. These are Dave's services. And I love it so much. Clarity, security, prosperity, and legacy.

Dave Spence (20:47)
Mm-hmm.

KC Brothers (21:05)
That just makes the marketer and me so gleeful. I'm like, this, it's clear what you are selling. I might not know the expertise that you have and the things you're doing on the background and the softwares you're logging into and the numbers you're logging, but I know your aim is to provide me with clarity, security, prosperity, Legacy. Ah, I thought it was brilliant.

Dave Spence (21:08)
You

Yeah.

Thank you. Thank you. And I actually came up with those myself. I didn't want to be like everybody else. wanted, and I've had different players on my, in my firm and it, you know, it's, grows and it ebbs and flows as a team, we want to put those needs and those wants and those concerns of the clients ahead of everything else.

And that's part of the art versus the science. It's the real desire to want to help. And I think almost every tax professional I know really has that feeling inside them that they want to do what's right. They want to do what's best for the client. They want to protect them whenever they can. But they're afraid to sell. They're afraid to be perceived as selling something. And I get that. But what's the...

KC Brothers (21:51)
Mm-hmm.

Dave Spence (22:14)
What's the result if you do nothing? Then they go out into that jungle and they get one of the 90 % that's going to oversell them or undersell them and not understand the stuff that they need to understand. So you really don't have the choice. And AI and fee issues and the tax law changes and all that stuff is breathing down our necks. They're necks. I don't do the tax work anymore, but yeah, I mean, they hate life.

KC Brothers (22:16)
Yeah.

Dave Spence (22:38)
when it comes to tax season and all that. So the ones that are happy are the ones that are getting out of the nine to five and 60 hour weeks for three months out of the year and that kind of stuff. So again, I come back to the win-win.

KC Brothers (22:44)
Yeah.

Yeah, well, and the tax planning,

yeah, and the tax planning to your point about seasonality is just a really great way to level out that seasonality, to maintain touch points with your customers, especially if they're clients that are just tax clients, To that point, actually, this could be a really good tax planning, specifically, can be a really good next step into

Dave Spence (22:57)
Ahem.

KC Brothers (23:13)
trying to move into a subscription type pricing model, just because it very naturally organically adds another touch point that isn't based on tax deadlines. And then that tax planning again can get us more into this financial planning like you're talking about. I do want to, we've covered a lot and to your point, there's also additional certifications whether an accountant chooses to do that themselves, hire someone else or whatever. You have written a book.

called The Tax Pros Guide to Using LERPs for Advanced Tax Planning. We didn't even get to talk about those specific levers to pull, but you have, again, written this book that is a resource to accountants as they're exploring this as an option of pivoting or adding a more robust set of services to their clients.

Dave Spence (23:57)
Thank

Right. I'm associated with David McKnight's Power of Zero advisors. And he kind of wrote the book on Lerp's life insurance retirement plans. And basically, it's overfunding a life insurance policy. And it's something that's been around a long time. And people justifiably critique it as not making sense in a lot of cases. I'll tell you briefly why that is.

But if you're thinking about the tax mess that we're going to be in, we're looking at the lowest tax rates we'll see for the rest of our lives. David Walker, the former Comptroller General of the United States, wrote an endorsement for my book and he said, Dave's right, these are the lowest tax rates we're ever gonna see. Now, if that's the case, then we should be talking to our clients about doing Roth conversions, lining up tax-free income sources in the future.

And for your affluent clients that can't really do much more in the Roth venue, and they've already done everything they can, then they should be looking at these LERPs. Now, LERPs will fail because they're oversold by people that are trying to get the sale, right? Insurance companies take on a big liability when they write a policy, right? They get a $10,000 premium and they have to guarantee a hundred...

million dollar death benefit, right? We want our clients to put in 50,000 or 100,000 into that product with the million dollar benefit and then start making money on the cash value and pull it out tax free later on like a Roth. So that's what the whole idea with the Lerp is. Unfortunately, to sell enough Lerps and cover their expenses and build up their reserves that are required under state laws, they have to have a lot of front end expenses.

and the insurance commissions that they pay are big in the first year and they're tiny or not at all after that. And there's an incentive lost right there for that policy to be serviced properly. And if you get past the first 10 years where those expenses are higher because of the economics of insurance, then in the next 10 years and 20 years, that thing's going to outperform other assets like a Roth IRA. It can outperform a Roth IRA.

because its expenses are going down in the later years, where if your advisor is making 1%, those expenses are going up in the later years. So I try to teach people that if you understand the mechanics and the values that that life insurance policy can bring to the table, you would want to do both that and a Roth for people that have enough money to do both.

KC Brothers (26:36)
Mm-hmm.

Dave Spence (26:38)
So that's what I wrote the book about is to help people get past the myths. And there's several myths and myths. Myths include, you're you're going to be in a lower tax bracket when you retire. That's gone, you know, and your investment advisors taking care of all that. And he's probably going to tell you if you should be doing Roth conversions. That's not true either. If he is he going to tell you to do a hundred thousand dollar Roth conversion and pay forty thousand dollars in taxes? No, he wants to manage that forty thousand. Right.

KC Brothers (26:42)
Yes. Yeah.

Dave Spence (27:06)
His income is going to go down if he tells you to do something like that. And they always say, I don't understand the insurance, but I know it's a wrong deal. You know, and it's not, I think tax professionals need to understand it's a good deal in the right circumstances. And your people think they're tax advisors, given all the tax planning that they need. That's not true. We're not telling all of our clients to use that 22 and 24 % tax bracket, do the Roth conversions. Think about a LERP because you have extra money to work with.

And that lurk can prevent losses. If you use the right product in a bad market, you get a 0 % return where the Roth just took a big hit. And you got two places that are protecting each other. You got tax diversification. If they change the laws down the road, which they'll have to do, where are they going to go to get the money? They're going to say, we've got trillions of dollars sitting over here in Roth accounts. Let's tell them, let's pass some laws and tell them we meant well.

or my predecessors meant well, we can't afford this. We're going to have to throw half your Roth distributions on your tax return, just like you do with Social Security, which started out tax free in the beginning. all of this stuff is what I'm tax professionals to do. And I have subscriptions that they can come along with me. I can coach them at whatever level they're at. I can take them to the next level. I can hook them up with the right advisors so they know they're getting somebody good.

That's where I am and that's where my heart is.

KC Brothers (28:30)
Awesome. Well, Dave, thanks for giving a quick summary of the book. If your interest is piqued, we'll put a link to the book in the show notes as well as a link to Dave's website where you can reach out and contact him. Dave, thank you so much.

Dave Spence (28:45)
Well, KC, thank you.