You have an accountant who prepares your tax returns.  You have someone who manages your investments.  So how could a financial planner help you?


  1. Your accountant is looking backwards.

    When your accountant prepares your tax returns, he or she is looking backward.  The purpose of your tax return is to report to the government on activities that have already happened – income you already earned and expenses you already paid.  The process of financial planning is about looking forward, starting where you are now and pursuing your financial goals.

  2. My accountant does tell me how to lower my tax bill.

    As part of the information required to prepare your tax return, your accountant will learn how much you are contributing to your qualified retirement plans such as your 401k or 403b and your IRA accounts.  And he or she may point out that you can lower your tax bill by increasing your contributions to those plans.  But unless you provide additional information to your tax preparer that isn’t required for a tax return they won’t know your outstanding debt besides your mortgage, your investment holdings and risk tolerance, and your savings and expenses.  And you probably don’t discuss your long-term goals with your tax preparer.   Without this information your tax preparer really doesn’t know if increasing contributions to your retirement plan is the best step for you to take with your money.  Your financial planner considers your current income tax liability but does so in conjunction with the other financial areas of your life and with your ultimate goals in mind.

  3. Your investment manager doesn’t have all of the information.

    Odds are your investment manager has discussed your risk tolerance with you.  And he or she periodically confirms the length of time before you might need access to the funds he or she is managing.  Then your investment manager is tasked with doing their best to profitably invest your funds and have the desired amount of cash available when you need it.  However, it is likely that you didn’t discuss the funds that your investment manager isn’t managing.  For instance, you may have current and old retirement plans or funds that you are managing yourself.  Without having access to the bigger picture your investment manager may not realize that you already have a significant amount of your portfolio in a previous employer’s stock as one example.  Or your investment manager may not realize that you have a large portion of your 401k allocated in one class of investments due to limited investment options in your plan.  If he or she doesn’t know to adjust for your outside investments you may have a riskier portfolio than your investment manager intended.  A financial planner has the ability to look at your full set of  investments in the context of your entire financial picture.  They can see where there are limitations and where there are offsetting opportunities in different areas.  They can provide insights helpful to you and to your investment manager.

  4. You force your financial professionals to be short-sighted.

    Without a financial plan which outlines your long-term goals and your strategies for reaching your goals, your financial professionals are forced to focus on the short term.  You’ve seen ads for tax preparers that promise the biggest refund.  And you’ve heard investment managers touting impressive returns.  In the absence of long-term planning, a tax preparer may feel responsible to get you the largest refund possible this year, even if it means a less ideal situation in the following years.  And an investment manager is pressured to produce big gains.  Without having a long-term plan, your investment portfolio may be targeting a higher return and therefore, taking on more risk than necessary to meet your goals.  A financial planner can help you build a long-term strategy including tax planning and investment planning.

  5. Recognize small changes to the big picture.

    Rules and regulations change all the time. Factors in the economy shift over time.  And your life changes every day.  A financial planner helps you identify and clarify your goals. Then your planner helps you recognize factors that affect your pursuit of those goals.  As the financial backdrop of your life varies over time, your planner can alert you to the specific financial areas that may be affected.  These changes come about due to anything from tax law changes and fluctuations in the economy to closer changes like a relocation or a change in employment or family dynamics.

  6. Have a Head Coach.

    Seeing the entire perspective allows your financial planner to coordinate the many areas of your financial life.  Your financial planner will recognize when a change in one area of your fiscal life will require adjustments in other areas.  They are in the position of seeing how all of the different aspects of your financial plan integrate with each other.  They can work with your attorney, accountant and investment manager to ensure that their efforts are coordinated and have a common goal in mind.

  7. What can you achieve?

    Do you know what is possible?  Money is a very private subject for many people.  Financial knowledge often isn’t passed down from generation to generation.  Friends and neighbors don’t discuss financial concerns.  A financial planner can present possibilities that may not have occurred to you.  They may be able to help you craft a plan of action to reach goals you never dreamed possible.

  8. You don’t know what you don’t know.

    Did you realize that whether a particular investment is held in your retirement plan or in your standard investment account could make a difference in your marginal tax bracket? It can even make a difference as to whether you are subject to an additional tax.  Besides affecting how much money you have available for current lifestyle expenses, it affects how much you have left to save and invest for the future.  Did you realize that decisions you make today to manage your current income taxes can affect what you’ll pay for college in 3 years? Or that they can affect your income 20+ years down the road?  Or that those decisions could affect what you will pay for your health insurance 20+ years down the road?  A well-trained, experienced financial planner can integrate scores of different factors in your financial plan ranging from near-term considerations such as current compensation and investment decisions through future concerns such as social security and retirement income planning and beyond.  Your financial planner is tasked with staying abreast of changes in tax laws, economic conditions and government policies and how they affect your pursuit of your goals.

Your accountant and investment manager each serve a purpose in your financial life.  Having a financial planner devise a strategy to pursue your financial and lifestyle objectives can allow your other financial professionals to be more effective in helping you reach your goals.