President's Blog - Buddy Movie, Advisor Style


A very popular film genre is the “buddy movie”, where two people from disparate backgrounds are forced to combine their efforts to accomplish some goal. They almost always succeed, and usually develop some sort of lasting bond. 

Which brings us to advisors and accountants.

Do you work closely with your clients’ accountants? Have you been requested by a client to contact his or her accountant? Or do you have clients who want to keep those two elements of their advisorial life separate?

There are clearly times in any investor-advisor relationship when the question of tax status and effect comes up. Advisors frequently answer questions about the tax implications of particular investments, especially when they involve retirement income or disbursement of proceeds.

It is an advantage for advisors to know who is influencing their client investors, and it is significant to know what kind of advice they are getting from others. But the other professionals who work with your client are sometimes offering advice which covers some of the same areas or decisions you have covered in your conversations with that client, and sometimes the advice is not so much contradictory as confusing. 

Would it be beneficial to have a conversational relationship with the accountant  your client works with?

It is mid-January, and investors are preparing documents for their annual meeting with their accountant to discuss their tax liability for 2018. In those conversations, they will most certainly bring up matters which involved conversations they had with their financial advisor. 

In some cases, it is likely that an investor has been told by his or her advisor to explain something to their accountant, or vice versa. Would it not be beneficial for the investor not to serve as the go-between and have advisors and accountants talk amongst themselves?

Wealthy investors want that. According to the  Spectrem study The Wealthiest Americans: $25 Million Plus Investors - 2018, eighty-three percent of investors with a net worth over $25 million want “my advisors, accountant, attorney and other professionals to communicate with one another to best help my financial position”.

Do you have contact with your clients’ accountants? Do you encourage a relationship with your clients’ accountants? Do you explain to your clients the advantage of having you and the accountant discussing the best approaches to investment decisions?    

The relationship between an investor and his or her advisor is very similar to the relationship between that investor and his or her accountant. In our study Advisor Relationships and Changing Advice Requirements, Millionaire investors with a net worth between $1 million and $5 million placed their trust level with their advisor at 82.52 on a 100-point scale, and their trust level with their accountant at 78.31. The report indicates investors have a slightly higher trust level with their personal physician and a notably lower trust level with their personal attorney. 

There is no question financial advisors understand the various ramifications of investment products. But it is just as easy to understand that an accountant is going to have a better understanding of a client’s tax situation, which may impact an investor’s investment choices. It’s a complicated puzzle which could be made much simpler if the person suggesting investments speaks on a regular basis with the person who prepares the tax return.

© 2019 Spectrem Group