For those individuals and businesses who are already clients of our CPA firm, we provide integrated financial planning services on an hourly basis—an approach that delivers two giant benefits to many high income taxpayers and successful small business owners.
Hourly Planning Reduces Costs
Most individual investors don’t appreciate how costly traditional financial planning services are, especially if they end up using actively-managed investments.
For example, if you’re using a typical assortment of mutual funds, your portfolio may earn on average about 8% a year over long periods of investing. (We know. This hasn’t been the case recently. And we don’t expect good returns over the next decade. But hopefully over the decades of investing you probably have left, returns will return to their long-run historical average.)
Unfortunately, if you’re paying (indirectly of course) the mutual fund company a 1% fee and an investment advisor another 1% fee, you’re giving up 2% of your 8% return just in fees. Note that such an arrangement is equivalent in effect to a 25% tax.
Tip: If a 2% fee doesn’t sound so bad to you, fast-forward a few years to the point where you’ve got, say, a million dollars in your investment portfolio and you’re earning $80,000 a year in profits. Paying 2% in total fees at that point will take $20,000 a year out of your income.
Our response to the realities of the preceding financial arithmetic is to say that in their investing, individuals should use a passive investment approach that employs a standard, vanilla, off-the-shelf asset allocation formula and also a small handful of super-low-cost index funds.
By going this route, your personal financial planning process becomes very cost-effective, extremely tax-efficient, and truly straightforward. And by the way? Any investment or personal financial questions you have can probably be answered when we do your tax return or in a mid-year consultation.
Integration Dramatically Boosts Tax Savings
Investment advisory cost savings, however, don’t represent the biggest benefit of getting your financial planning services from a CPA firm.
Rather, integrating your financial planning with your individual and business tax planning represents the biggest benefit. All sorts of synergies appear when you can integrate.
For example, some non-CPA financial planners may be able to integrate your retirement planning decisions with your small business’s pension plan set-up and structuring decisions. But we can further improve this analysis by also considering the substantial impacts of your entity classification (S corporation versus LLC and so on) on your retirement savings and pension plan.
As another example, many non-CPA financial planners may be able to value a small business interest and include an exit value estimate in your retirement planning. But we can go several steps further and identify ways to minimize the income, payroll, and estate taxes that stem from the sale of a business all while keeping your personal financial plan on track.
A final example: Nearly every financial planner can help clients with simple college savings programs and with exploiting educational tax credits and tuition deductions. But if you get our help, you may be able to also consider more creative college cost solutions such as providing for a child’s college costs via tax-free fringe benefits, employer-provided tuition reimbursement programs, or family income splitting formulas.
In short, by getting your personal financial planning from the same CPA who provides you with tax preparation and planning, you will not only greatly reduce your investment advisory fees, but also likely end up with really significant income, payroll, or estate tax savings.
Pricing and Contact Information
Most questions that you might have concerning financial planning can be answered when we do your annual individual tax return. If you do need additional help, we’re happy and able to provide hourly financial planning services outside of tax season and after we’ve completed your return (contact us for more information, including quotes on pricing).