Navigating tax season with securities-backed lending solutions

The federal tax return deadline of April 15 is looming, and in today's complex financial landscape, many individuals find themselves grappling with tax debt. The instinct to liquidate assets to cover these liabilities can often lead to unintended consequences, such as capital gains taxes and disruption of long-term financial strategies. Fortunately, financial professionals can play a crucial role in helping clients navigate this challenge.

“Clients facing significant tax liabilities may feel frantic and anxious, turning to their investments to meet their obligations. However, this can trigger capital gains taxes, further increasing their overall tax burden,” said Debra Griffin, vice president of Nationwide Securities Backed Lending (SBL). “Liquidating assets can also disrupt investment strategies, potentially impacting portfolio growth and future financial security. Financial professionals can help their clients understand the impact of liquidating assets and review alternative strategies that can help manage tax liabilities more effectively.”

Understanding the situation
Before offering solutions, financial professionals need to thoroughly understand their client's financial situation, Griffin said. She suggests starting with a comprehensive review of income, expenses, assets and liabilities, allowing financial professionals to gain a clear picture of their client's financial health, identify the root causes of tax debt and develop a tailored strategy to address it.

Providing solutions
Developing a realistic repayment plan is essential for clients with tax debt. Financial professionals can assist in creating a budget that prioritizes debt repayment while ensuring clients can meet their other financial obligations, Griffin said. She highlighted the following solutions which may help clients address tax debt:

1. Home equity line of credit (HELOC): A HELOC allows clients to borrow against the equity in their home. While this solution can provide a flexible source of funds at potentially lower interest rates than other loans, clients could risk their property if this debt is not carefully managed.
2. Personal loan: These loans can offer fast turnaround times, fixed interest rates and repayment terms. However, as of March 2025, the average personal loan interest rate was 12%, with those with poor credit having rates over 30%. Financial professionals should consider clients’ financial situations before offering this solution and help them compare lenders to find the most competitive rates.
3. Securities-backed line of credit (SBLOC): SBLOCs allow clients to borrow against the value of their investment portfolio without selling their securities. By using their assets as collateral, clients can access the cash they need without disrupting their investment strategy. They also offer rapid processing times, with Nationwide’s SBLOC solution, Nationwide Smart Credit ^SM, allowing clients to access cash in hours or days instead of weeks or months like HELOCs.

“A securities-backed line of credit can ensure clients avoid immediate tax consequences from asset sales and allow their portfolio to continue to grow, helping to maintain their long-term financial plan,” Griffin said. “However, it’s important to make sure you address risks with your clients, such as the need for additional collateral if the portfolio value drops below a certain level.”

For financial professionals looking for more help breaking down these solutions, Nationwide offers an SBL capital cost comparison calculator. After inputting the dollar amount needed, the client’s tax filing status and their adjusted gross income (AGI), the calculator illustrates three possible scenarios: liquidating assets, a HELOC and a SBLOC. The tool – which was the first of its kind in the industry – breaks down which option is the most efficient and provides the most cost savings. It also includes a free, printable and savable report, making it easy for financial professionals to review all options with their clients.

“Helping clients understand they can manage their tax liabilities without disrupting their financial strategy or incurring additional taxes is key,” Griffin said. “By exploring alternatives with them – like SBLOCs – you can find solutions that fit their needs and help maintain their financial stability, allowing them to navigate tax season with confidence, while keeping their financial goals on track.”

For more information on Nationwide’s SBLOC solution, Nationwide Smart Credit, and other SBL resources, visit https://www.nationwide.com/financial-professionals/products/corporate-solutions/sbl/.

EGM-0333AO.1
04/2025