Should Your Tax Expert Also Be Your Financial Planner? – upd Jan’15

tax expert and financial plannerTaxes can have a major impact on your financial planning and investment strategies. Consequently, your CPA® is a source of valuable information for minimizing your taxes. However, some CPAs® provide tax, planning, investment, and insurance services.

Leverage Relationships

Some CPAs® began offering financial planning services for two reasons. First, it was an easy way to generate more revenue from existing relationships. Second, if the tax code is ever simplified or if online tax reporting began to erode their traditional business, they would have an alternate revenue stream to fall back on. These reasons benefit the CPA® and not the CPA’s® clients. 

Saves You Time

Obtaining multiple services (tax planning, tax preparation, financial planning) from one provider is convenient and efficient. When the same professional provides tax and planning services, you are no longer required to tell your CPA® what was recommended to you by your financial planner. And you don’t have to tell your planner what was recommended by your CPA®.

Tax Efficiency

All planning and investment services should have a tax efficient component. For example, you do not want to be exposed to large amounts of capital gains taxes when you sell investments. Or, you want to minimize the impact of taxes on your estate when it is distributed to heirs. There is also the issue of ever-changing laws that impact when you take gains and losses, open IRAs, contribute to health savings accounts, etc.

Teams of Professionals

It is increasingly common that professionals work in teams to provide comprehensive, integrated solutions to their clients. For example, a financial planner works with an investment advisor, CPA®, insurance agent, and estate planning attorney. The professionals have different employers, but they have agreed to work together to provide holistic solutions to their clients.

Layers of Fees

There are some opportunities to save money by eliminating redundancy and contradictory advice. However, each of the above professionals must be paid so there can be layers of fees. Be sure to obtain a fee quote before you select a team of professionals to help you achieve your financial goals.

What’s the Risk?

Your single biggest financial risk is one professional who wants to provide all of the services himself. There is a high probability he wants to provide all of the services to maximize the amount of revenue he generates from his relationship with you. There is a low probability one professional is an expert in all of the disciplines. Be very cautious when one financial planner wants to do it all: Planning, investment, insurance, and tax advice

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