As you approach retirement, having the right team in your corner is crucial. Two key players are your financial advisor and your accountant. If these financial professionals aren’t on the same page, you could miss out on significant benefits. Let’s explore why these two need to be more than just acquaintances—they need to be best mates.
On the other hand, your accountant is like the engineer who ensures that the plan is built on solid ground. They handle the nuts and bolts of your finances—the everyday accounting tasks that keep everything running smoothly. They know the ins and outs of the Australian tax system (GST, CGT, depreciation, small business advice and many more) and can help you navigate the complexities of tax planning.
When these two professionals communicate and collaborate, you get the best of both worlds. Your financial advisor might suggest an investment strategy, and your accountant can weigh in on the best structure to invest the funds from a tax and asset protection perspective. This teamwork ensures that your financial plan is not only profitable but also tax efficient.
Effective collaboration between the two is not just for those nearing retirement or running a business. It’s crucial for anyone looking to manage their finances more effectively, whether you're saving for a home, planning a family, or setting long-term financial goals.
For example, if you're planning to buy a home, your financial advisor might suggest a savings plan or investment strategy to help you reach your down payment goal. Meanwhile, your accountant can provide guidance on ways to maximise tax benefits. Without this synergy, you might miss out on golden opportunities.
Similarly, if you're saving for your child’s education, your advisor can create an investment plan tailored to your goals, while your accounting partner can ensure you're taking advantage of any available tax benefits or education savings plans.
Let’s look at some real-world examples of how a strong relationship between your financial advisor and accountant can benefit you.
Starting a family involves significant financial decisions, from buying a home to saving for education. Your financial advisor can help set up a comprehensive financial plan, while your accountant ensures that your financial strategies align with your overall budget and any potential tax benefits, making every dollar work harder for your family.
As your family expands, so do your financial responsibilities. Your advisor can help create a budget that accommodates everyday needs and future goals, such as schooling, home improvements, and retirement planning. Your accountant adds value by identifying areas to optimise spending, managing cash flow effectively, and preparing for future expenses, including the potential tax implications of owning an investment property.
Maximising superannuation contributions is vital during your peak earning years to strengthen your retirement planning efforts. Your financial advisor will recommend strategies to grow your retirement savings, while your accountant ensures your approach is compliant with regulations and helps you understand the impact of capital gains tax on future investments.
Your accountant also has access to many ATO superannuation reports that your financial advisor can use to improve your circumstances. For example, your accountant can provide reports on your superannuation balances and carried-forward unused contributions, which your financial advisor can use to offer advice on superannuation contributions to help reduce your income tax.
Whether you're investing in property, launching a side business, or pursuing other income avenues, your financial advisor can help you create a balanced investment portfolio and financial strategy. Your accountant complements this by providing insights on how to structure your investments and income effectively to ensure you minimise tax liability while positioning yourself to achieve your long-term goals.
Accountants may identify a situation where your family trust has excess cash and beneficiary accounts. Rather than keeping this cash in your trust where you would be paying tax at your marginal tax rate (0% to 45%), your financial advisor could discuss investing these funds in superannuation where earnings would be taxed at 15% in accumulation phase or 0% in pension phase.
Once you retire, the way you draw down on your investment portfolio can significantly impact your income tax situation. Your financial advisor can help you determine the most sustainable way to withdraw funds, ensuring you don’t outlive your savings. At the same time, your accountant can provide insights into the tax efficiency of different income streams—such as account-based pensions, annuities, withdrawing funds from trusts and companies, or part-time work. This collaboration can result in a retirement income strategy that maximises your income, reduces taxes, and gives you more money to enjoy in your golden years.
If they don’t already know each other, make introductions as soon as possible. Let them know that you want them to work together and share information for your benefit. The sooner they start collaborating, the better.
Encourage regular meetings or reviews where both your financial advisor and accountant are present. This might be annually, biannually, or whenever there’s a significant change in your financial situation. These reviews ensure that everyone is on the same page and can adjust strategies as needed.
Be open about your financial goals and any concerns you have. The more your advisor and accountant know about what you’re trying to achieve, the better they can tailor their advice and strategies to suit your needs.
Look for financial professionals who understand the importance of working together and have a mutual respect for each other’s expertise. During your initial meetings, inquire about their approach to collaboration. A willingness to work together is a positive indicator that you’ll receive financial advice that is aligned both in the short term and the long term.
Inconsistent advice: If your advisor and accountant provide conflicting recommendations, it’s a clear sign they aren’t collaborating. For instance, your advisor may suggest a high-risk investment, while your accountant warns against it due to tax implications. This inconsistency can lead to confusion and frustration.
Lack of coordination on financial goals: When your financial goals aren’t aligned between the two professionals, it can hinder your progress. For example, if your advisor focuses on aggressive growth but your accountant emphasises risk reduction without a shared strategy, you may end up with a fragmented approach.
Missing opportunities: If you notice missed opportunities for tax savings or investment benefits, it could indicate a lack of communication. For instance, if your advisor isn’t aware of your accountant's insights on capital gains tax, you may not fully capitalise on your investment strategies.
Psychological factors: Cognitive biases, such as confirmation bias, can cause each professional to stick to their perspectives without considering the other's input. This can lead to poor decision-making and missed opportunities for comprehensive financial planning.
Infrequent meetings: If your advisor and accountant rarely meet or communicate, it’s a red flag. Regular collaboration is essential for synchronising strategies and ensuring that both parties understand your financial landscape.
By recognising these signs early, you can take proactive steps to facilitate better communication and collaboration between your financial advisor and accountant, ensuring a more cohesive approach to achieving your financial goals.
So, if your accountant and financial advisor aren’t working together, it might be time to make some introductions. After all, when your financial experts are in sync, your future looks that much brighter.
At Findex, we understand the critical importance of this partnership when it comes to financial planning. Our integrated approach combines wealth management and accounting expertise, enabling you to benefit from a unified team that collaborates effectively to support your financial goals.
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