There are great efficiencies to be realized in a professional setting when everyone understands the scope of their responsibilities. Behind the scenes, we are often working and collaborating with professionals across industries to better serve our clients. When talking with prospective clients we’re often asked, “Can you do my taxes.” The short answer is no, Exchange Capital Management does not offer tax or estate preparation. However, it is important to understand the reasoning behind that answer.
Stated plainly, the main functions of a financial advisor are to build and maintain financial plans and manage investments. It may sound simple but the extent of detail that must be considered to execute a thorough financial plan and carry instruction through to investments is ever changing and never ending. Financial advisors must take into account...
This list just scratches the surface of the many constantly evolving aspects of a financial plan. A good financial advisor will help you track and manage this shifting landscape, changing course where needed.
Taxes and estate planning are essential to building strong financial plans. However, their importance doesn’t magically turn all advisors into accountants and estate attorneys.
Here's the thing, while tax and estate planning can heavily influence your financial plan and how your investments are managed, these subjects each bring their own dynamic landscape and complicated list of considerations. It would be incredibly difficult for one person to have a firm understanding of all three fields, so financial advisors, tax advisors, and estate planners all rely on each other's proficiencies to help serve their clients. Because of this, each role should be filled by a professional specializing in that subject, who holds knowledge, experience, and expertise in their specific field.
I’m going to borrow a metaphor that I’ve heard used around the office to illustrate my point: your financial advisor is like the quarterback of your financial team. They make calls and orchestrate plays, but they need receivers and running backs to win the game. The quarterback cannot throw the ball, run down the field, catch the ball, then run into the endzone for a touchdown. A successful game plan hinges on the dedication of each player to their specific role on the team.
It’s important to note that our perspective is not the only one out there. Some financial advisory firms offer tax and estate planning bundled into their services. This may sound like an added benefit, but as with all things, exercise caution. A team member who files tax returns as part of their job is not the same as a dedicated tax advisor. Don't sacrifice the true dedication to each field that a separate financial advisor, tax planner, and estate planner bring to the table.
While no single professional should perform all functions, they’re more effective and efficient when they communicate with each other. When a financial advisor is in direct contact with their client’s tax advisors, attorney, and other employed professionals, information flows more freely and the team functions more successfully. Of course, it is important to not sacrifice expertise for convenience. Each role should be filled by a dedicated expert, but together they'll make a team focused on your needs.
Olivia Stacey, CFA is an Investment Advisor at Exchange Capital Management, a fee-only, fiduciary financial planning firm. The opinions expressed in this article are her own.