I have my CPA designation, and the number one thing people ask me when they hear this is ‘how can I pay less in taxes?’
It is a default assumption of the general public that coming up with fancy tax ‘schemes’ and hacks are the only thing accountants do. As someone who never even completed a corporate or personal tax return other than my own, I find this really challenging (but that’s a discussion for another day).
The answer to the question of how to pay less taxes is ‘it depends’ which is a classic accountant answer. The reason for ‘it depends’ is based on a myriad of personal factors and what the long-term financial goals and objectives are for you personally. It gets exponentially more complicated when speaking to a business owner as well (as I have been as well).
From a recent webinar from wealthmanagement.com featuring Jeff Levine, Chief Planning Officer at Buckingham, entitled Integrate Tax Planning Into Your Financial Planning Process “tax planning is the top service clients with at least $250,000 in assets want from their financial advisor.”
The tax code is such a dense and convoluted document, accountants unfortunately have to spend much of their time buried in compliance reporting and supporting tax disputes. They also don’t teach in the CPA curriculum much around personal finance and investing, leaving that for the CFP crowd.
However, these two topics - tax savings and personal finances - are inextricably intertwined. And this is where it gets complicated. Accountants have the knowledge of the tax code but don’t have either the expertise or visibility into investment portfolios of their clients to make holistic recommendations. On the flip side, wealth managers understand the advantages and disadvantages of various investment structures, but are not corporate structure specialists.
So who connects the dots? It can be either side, but in the end the answer is whichever professional wants to be viewed as the ‘trusted advisor’ or the ‘quarterback’ for the client. This doesn’t mean who says they are the ‘trusted advisor’ this is who from the client’s perspective fills that role. The person that says “I'll take care of this and make sure we get the right people around the table” and pulls in the right advisors - investment, tax and legal, all together working harmoniously and cohesively.
There are more and more accounting firms spinning up wealth management arms, and vice-versa, or forming strategic alliances with other professionals in order to give their clients a consistent and coherent offering. The broader number of services provided, and the more relationships a client has within a firm, the less likely they are to churn. This makes sense given the impending great wealth transfer, where monetizing the planning and transactions that come with this will be pivotal to firm success.
Firms that want to win in this forum, need to consider the following items:
- Define the scope of services you’re willing to offer: how far into other verticals are you willing to go?
- Ensure the right people are in place: Identify gaps in your team’s expertise and fill that through hiring, acquisition or strategic partnerships with other firms.
- Use data to enrich the story: For each part of the planning process, find data and insights (including from tools like interVal) that can inform the planning process.
There is no right or wrong answer to how you execute on the three points above. They are simply the steps to go through to assess how your firm provides the essential holistic experience that your business owner clients need.
Author: Dave Bunce
