Why don't my accountant and financial advisor work together?

Ensuring your accountant collaborates with your financial advisor is important, as they will be able to discuss and workshop ideas to improve your financial position. However, in my 20+ years of experience, this collaboration almost never occurs, unless they work in the same firm. Theoretically, there shouldn’t be any impediments to these two professionals working together. Practically, it doesn’t happen and depending on the complexity of your situation, it could be costing you. Accountants and financial planners are different beastsIt is a common misconception that accounting and financial planning roles are similar. They are not. The roles are about as similar as dentist and doctors (general practitioners). Apart from knowledge and experience which can be vastly different, the next biggest difference is that accountants spend most of their time focusing on what happened over the past 12 months and sometimes on what might happen over the next 12 months. However, financial advisors are more focused on what will happen over the next 10+ years i.e., the medium to long term. This distinction is very important because the focus is habitual. That is, it’s not a natural tendency for accountants to think about what a client’s financial position might be 5 years from now. The truth is both approaches are complimentary. People would greatly benefit from both an accountants and financial advisors’ perspective. Be careful asking your accountant for financial advice It is natural to ask your accountant for financial advice. But there are a few important limitations to consider. Firstly, their advice will be shaped by their own experiences, which are likely to be limited, as they are not financial advisors. Accountants will often advise their clients to do what they have done for themselves such as simplistic advice like “if you are going to invest in shares, buy the big banks and miners”. But what might be appropriate for them won’t necessarily be appropriate for all their clients. Secondly, to give financial advice, you must be authorised under an Australian Financial Services license. Most accountants are not. Similarly, to provide tax advice you must be a Registered Tax Agent which most financial advisors are not. Why don’t financial advisors and accountants typically work well together? Of course, the reasons may be different in every situation, but I discuss some of the common reasons that I have observed over the past two decades that impede these two professionals from working together efficiently and effectively. Different ways of doing things We recently prepared some advice for a financial planning client that uses an external accountant. We recommended they structure their investment in a simple discretionary trust. The client took this advice to their accountant who recommended that they draft a customised trust at a much greater cost. We felt that this recommendation overcomplicated matters and gave rise to unnecessary costs. Consequently, the client structured the investment in personal names to avoid this complexity. The problem is that this structure provides less taxation flexibility and will probably result in a higher taxation liability in years to come. Unfortunately, the client is the meat in the sandwich. But of course, the clients not going to completely disregard their accountant’s advice.  If this client was also a tax client (i.e., ProSolution acted as their financial planning and taxation advisors), what would have happened is that both our financial advisor and accountant would have vicariously debated which structure was best for the client having regard to all financial planning and taxation matters. I’m confident that the family trust recommendation would have been deemed optimMy new book is available for pre-order now: Pre-ordering the book will help me get it into bookstores. So please do me a favour - please consider pre-ordering now - links and pre-order bonus are available here: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at [email protected]. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.