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Facing an upcoming tax bill?

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You have choices on how you pay for your personal or business tax bill. Your Financial Advisor at Wells Fargo Advisors can identify your choices and consider each based on your needs and long term goals. Options to consider may include:

  • Using cash from a savings or an emergency fund
  • Using cash from the sale of assets in different types of investment accounts
  • Borrowing cash using a securities-based line of credit, such as the Wells Fargo Advisors Priority Credit Line (PCL)

You may not be familiar with a securities-based line of credit. A securities-based line of credit helps you meet your liquidity cash needs by unlocking the value of your investments without selling them. This type of borrowing may be easier to obtain and more flexible than other choices. Keep in mind, borrowing against investments has risks, so be sure to speak with your Financial Advisor to determine if a securities-based line of credit is appropriate for your current plan.

Each of your tax funding options has advantages and disadvantages. The one that is best for you depends on your unique situation. Contact your Financial Advisor today for help evaluating these options.

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1 Clients should read all lines of credit documents carefully.

Securities-based lending has special risks and is not appropriate for everyone. If the market value of a client’s pledged securities declines below required levels, the client may be required to pay down his or her line of credit or pledge additional eligible securities in order to maintain it, or the lender may require the sale of some or all of the client’s pledged securities. Wells Fargo Advisors will attempt to notify clients of maintenance calls but is not required to do so. Clients are not entitled to choose which securities in their accounts are sold. The sale of their pledged securities may cause clients to suffer adverse tax consequences. Clients should discuss the tax implications of pledging securities as collateral with their tax advisors. An increase in interest rates will affect the overall cost of borrowing. Wells Fargo Advisors and its affiliates are not tax or legal advisors. All securities and accounts are subject to eligibility requirements. Clients should read all lines of credit documents carefully. The proceeds from securities-based lines of credit may not be used to purchase additional securities, pay down margin, or for insurance products offered by Wells Fargo affiliates. Securities held in a retirement account cannot be used as collateral to obtain a loan. Securities purchased in the pledge account must meet collateral eligibility requirements.

Wells Fargo Advisors (“WFA”) and its financial advisors have a financial incentive to recommend the use of securities-based lending products (“SBLs”) rather than the sale of securities to meet client liquidity needs. Financial advisors will receive compensation on Priority Credit Line (“PCL”) and other non-purpose SBL from Wells Fargo Bank. Your financial advisor’s compensation is based on the outstanding debit balance in your account. In addition, your financial advisor’s compensation will be reduced if your interest rate is discounted below a certain level. This creates an incentive for financial advisors to recommend PCL and other SBL products, as well as an incentive to encourage you to maintain a larger debit balance and to discourage interest rate discounts below a certain level. The interest you pay for the loan is separate from and in addition to other fees you may pay related to the investments used to secure the loan, such as ongoing investment advisory fees (wrap fees) and fees for investments such as mutual funds and ETFs, for which WFA and/or our affiliates receive administrative or management fees or other compensation. Specifically, WFA benefits if you draw down on your loan to meet liquidity needs rather than sell securities or other investments, which would reduce our compensation. When assets are liquidated pursuant to a house call or demands for repayment, WFA and your financial advisor also will benefit if assets that do not have ongoing fees (such as securities in brokerage accounts) are liquidated prior to or instead of assets that provide additional fees or revenues to us (such as assets in an investment advisory account). Further different types of securities have higher release rates than others, which can create a financial incentive for your financial advisor to recommend products or manage the account in order to maximize the amount of the loan.

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