Should Your Financial Planner Be Your CPA, Too? Here’s Why It Might Be a Bad IdeaSubmitted by Castlebar Asset Management on May 14th, 2019
If you looked for a financial planner in Kansas City -- or any metro area, for that matter -- you might have stumbled across a firm who promises to not only do your financial planning, but also your taxes.
And your estate planning. And help with your insurance and advise on charitable giving strategies. And….
You get the idea. They offered to do a lot when it comes to your financial life.
At first glance, this might seem really appealing. It’s convenient, right? How easy it would be to have your financial planner and your CPA be the same person!
Convenience is one benefit of having one person (or one team) do it all under one roof. But that could come at a cost.
What You Gain in Convenience, You Lose in Independence
The downside to going with a one-stop shop to handle all aspects of your financial life is that there are no checks and balances. There is no one else to review the work that’s being done, and no independent perspective on the various parts of your finances.
While financial planning, taxes, and estate planning (plus other areas of interest, like investing, giving, insurance, and more) are all components that you need to consider when getting your financial life as a whole in order, they each represent very different arenas.
If your financial planner in Kansas City is also your CPA and they’re referring you to their coworker who is licensed to practice law in the state but works for the same exact firm, things might feel like they run more smoothly than trying to coordinate independent professionals.
But no one but that one firm is actually doing the work for you, so there’s no outside, objective third party who can evaluate the various components of your plan for accuracy. You only have the way this one firm does things, so you might also be missing out on chances to optimize various pieces of the plan.
That means it becomes your responsibility to keep an eye on all the moving parts, because no one is double-checking each other’s work. It’s down to you to make sure it’s accurate, and it’s on you to hold that one firm accountable to doing optimal work.
A Convenient Approach, But Still Not Seamless
That tradeoff might be worth it to you for the convenience you gain.
After all, if you work with various different firms who specialize in one area instead of offering a generalized solution that covers everything, you might feel like that’s added work to coordinate communication. Or you might feel you risk things slipping through the cracks since it’s not all in one place.
But one-stop shops still have cracks. Whether it’s human error or failures in processes, things can still go wrong and errors can be made.
And again, there’s no other outside, independent professional to double-check that work. Errors are actually more likely to go unnoticed in a firm that generalizes in various areas, especially if the firm is the size of a large corporation.
Big firms with various departments make it easy for communications to get routed to the wrong places -- or to simply get lost in the shuffle. And then it’s back on you to hold that single company accountable to doing good work for you.
Choosing Specialists That Can Do Deeper Work -- and Keep Each Other Accountable to Better Work
Compare that to working with one firm as your CPA and another for your financial planning.
Each firm can double-check that the other one is doing the best, highest-quality, error-free work because each is approaching your plan with different processes, different perspectives, and different priorities.
It’s much easier for your financial planning firm to call out mistakes your CPA might make because there are no competing loyalties; each firm is committed to you first (rather than to protecting coworkers at the same company).
It also becomes each firm’s responsibility to gather information on your behalf, or push the other firms for better communication and responses. It’s likely going to be your CPA following up with your financial planner if they don’t get the information they need (and vice versa), rather than you trying to track all this information as it floats around in-house at a big company.
Working with specialists makes it easier to ensure each and every aspect of your financial life is being optimized -- and it also takes a big part of the burden of coordinating, communicating, and collaborating off your shoulders.
Going with specialists doesn’t mean isolating the various parts of your financial life that should be in sync with each other. It means getting that many more partners that are working toward what’s best for you.
It’s a team approach, rather than you versus that big giant firm where you’re just one of tens of thousands of small customers. Having three independent firms looking out for your financial life is better than one large organization that is accountable only to itself.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.