If you were building a new home, you would naturally expect that your architect and your builder would look at the same plans.
But what if they didn’t?
You’d end up with a house for certain, but would it be the one of your dreams? Probably not. More than likely it would be missing some important features you talked about with your architect but that never made it to your builder’s desk, and the builder proceeded to erect the serviceable, but standard, home he’s built many times before. One that isn’t tailored to your tastes, but liveable all the same.
This is a good analogy to consider if you have a separate CPA and a financial planner, a situation that could produce similar results. In an ideal world, both professionals would know your financial goals (your “plans”) inside and out, and perform their respective jobs with those in mind.
But when they’re not in the same room — or even on the same plane as far as understanding what you’re trying to accomplish with your financial resources — how can you expect to get the best results from their combined services?
No doubt about it: It can be difficult to get both parties working in unison to move you efficiently toward your goals. Some people solve this by hiring a firm that has both capabilities. But if you’re in this situation, there are some things you can do to help each party understand what the other is doing, effectively creating a well-oiled machine and the optimal experience for you.
Want to partner with a financial advisor who understands the intricate details of tax planning? Ask us about our integrated team of CPAs and advisors at Curio Wealth.
Why Alignment Is Crucial But Hard
CPAs and financial planners have different priorities: A financial planner wants to help you define your goals and create a plan that gives you the highest probability of achieving them. A CPA wants to ensure that your financial records and tax filings are accurate, compliant, and structured in a way that minimizes your tax liability.
Each, however, needs key information that they may not normally have access to in order to accomplish these priorities:
Your financial planner needs to have a good understanding of your tax situation so that when they make decisions for you, they can take the tax consequences into consideration.
Your CPA (or accountant) needs to understand your investment strategy so they can try to minimize your tax bill. It can also help them anticipate taxable events.
In general, a financial planner or advisor will take the time to get to know your situation better. They need to understand what you’re trying to accomplish, what goals you’re trying to reach, in order to be able to make decisions for you and help you invest your money. To do that, they’re going to talk or meet with you more frequently.
For CPAs, the world is a bit different. They don’t always have the time available to sit down and learn more. They have a deadline which compacts a year’s worth of work into a short period. And in an effort to make things as easy and efficient as possible, tax returns have devolved into a numbers-on-paper exercise. They simply don’t have as much time to sit down with someone in an attempt to understand their full financial picture.
What You Can Do To Encourage Alignment
To get both professionals in a place where they’re truly rowing in unison toward your goals, you need to be proactive.
Ideally, you should have your CPA and your financial advisor in the same room with you during your planning meetings — that’s how it should work in order for you to get the best possible advice. They need to have a good relationship where they can ask each other questions and give each other advice.
This is a challenge but it can be done if you’re committed to doing the work required to bring them together.
If you aren’t able to move those mountains, at minimum, give your financial planner a copy of your tax return every year from your CPA. A financial planner will likely ask for your 1040, but usually it’s not to make tax-driven decisions — it’s to get a sense of what your income is so they can understand what you live off of and estimate your retirement needs. They may make recommendations to you regarding taxes, but they will typically defer to your CPA for that advice.
Also, make sure your CPA has easy access to financial information they need from your advisor. Details like your unrealized gains, required minimum distributions, and the types of assets you hold are essential for your CPA to make informed recommendations about how and when to withdraw funds and where to direct future savings.
TIP: There’s a window of time when your CPA will be more likely to have availability to meet with your financial advisor: typically between April 15 and September 15 (working around tax season deadlines) and then from October 15 through the year end. Keep that in mind — plus your CPA’s much-needed recovery time from a compacted busy season! — when arranging meetings.
An Alternative Solution: Choose A Firm With Integrated Expertise
Important financial decisions — whether they’re about your investments, taxes, retirement plans, savings, and more — shouldn’t be made in a silo. One of the best ways to break down that silo is to choose a firm that houses financial advisors and tax professionals under the same roof.
When your accountant and your financial planner work together on a daily basis, it keeps your tax and wealth-building strategies in sync with your goals. Tax implications can be factored into every investment and planning decision to help you reach your goals faster.
The Curio Wealth team is made up of both financial advisors and CPAs, and we’re skilled in developing investment solutions that incorporate tax strategies. We understand the intricate details of tax planning and make sure that your investment strategies align seamlessly with your tax obligations. As a result, you can keep more of your money so that it grows for your future.
