Some things in life are better when combined with other things. Peanut butter is great, but better with jelly. S’mores are wonderful, but somehow tastier when eaten next to a campfire. Mobile phones are indispensable, but incrementally improve with every added app. This idea holds true with financial advice as well. CPAs and financial advisors are important and valuable resources in their own respects toward ensuring a sound financial future, but they’re even better when they’re both the same person.
The reason for this is simple; sound investment advice must be done with consideration of tax implications, as the cost of not doing so can be significant. Likewise, good tax planning often involves taking advantage of investment opportunities that become evident during the tax preparation process. Only the CPA Financial Advisor can ensure that these interdependent objectives are executed on successfully.
According to a study involving 42,000 advisors by Envestnet, a leading investment platform provider, the “value added” of using a financial advisor is roughly 2% per year. The added value of a CPA/tax management is another 1% per year. The study breaks down the added value coming from 5 core areas:
The following highlights more tangibly describe how the value of a CPA financial advisor can enhance your financial plan.
Tax Savings = Enhanced Investment Returns
When considering the financial plan for one’s entire life, one should make tax savings as much of a priority as the selection of investment and retirement products. Tax savings simply can have too tremendous a positive impact on maximizing your retirement nest egg to ignore. And its importance and value generally increases proportionally with your marginal tax rate. This is especially true today, given the generally rich valuations and low yields of most traditional investment options.
Tax Management = Tax Savings
As the value of your taxable investments grow, so does the importance of utilizing tax management to minimize taxes. Whereas many financial advisors may list these offerings, you can count on the CPA financial advisor to ensure that tax management and loss harvesting is being performed.
High Frequency of Interaction = Better Financial Maintenance
Another important ingredient to a sound financial plan is maintenance. Financial plans are snapshots in time that require periodic updates. Long-term impacts of near-term events such as career, family and preference changes need to be incorporated into the plan when they occur. So, frequency of interaction is paramount to good maintenance. And here again, the tax professional is, unfortunately like taxes, with you year in and year out. Hence, maintenance of a financial plan by a CPA financial advisor is a natural fit.
