Why I Switched my Accountant and Hired a CFP?

I mentioned this briefly in my “2019 – A Year in Review” post, but I wanted to write a full article on why I switched my accountant and hired a CFP to explain my reasoning and thought process.  I think professional services are a tricky subject and the value is really dependent upon each individual situation, so you should take the time to evaluate whether you need these services in the first place, and what the overall advantage would be to you. 

When you are paying for professional financial services, you want to make sure you are maximizing your value at all times, but more importantly, that you have the right professional to address your specific needs. 

Let’s start with evaluating my prior accountant. 

He was fine across the board, but just that, fine.  When I would ask questions, he would answer them.  But I had to bring the questions.  There was really no advanced tax planning.  It was up to me to map out my plan and then ask him if he agreed or disagreed. 

This is not the proactive planning strategy that I usually like to employ. 

So why even have an accountant in the first place? 

In my early years, I probably could have done my own taxes.  They were simple and I know I would have saved some money.  But what I really get from paying an accountant to do my taxes, is peace of mind.  I know that if I ever get audited by the IRS, my shit was done right.  Maybe you like to fuck around with the government?  But I don’t.  I’ve already had some terrible experiences that prove it doesn’t matter if you are wrong or right, if you get tied up in a fight with a slow, cumbersome bureaucracy, just the time and resources it will suck up alone isn’t worth the squabble.  

Okay.  So I have an accountant.  But why was I with this particular accountant? 

Simple, and probably like a lot of other people, he was my parent’s accountant.  Watching them, I did the same.  Now, at the age of 38, after probably at least 15+ years with this same accountant, I’m going to try something new. 

Is there risk?  Sure.  But can there be reward? 

That’s what I’m banking on baby… oh yes… that’s what I’m banking on. 

So what’s the plan? 

For the first time in my life I want to combine my taxes with a financial planner, so that I have one-person handling both facets of my life.  I want a single individual who understands both sides and sees my future goals from an accounting (looking backwards) as well as a financial (looking forwards) lenses. 

For me personally, I haven’t seen this skill-set in too many people.  There might be firms that employ both a tax arm and a financial planning arm, but they are still usually separated and most of the communication falls on you.  Plus, both sides usually don’t have extensive overlapping expertise so they lack a full understanding of the bigger picture.  Plus, all it takes is a small mistake to be lost in translation and that can have a compound effect on either area of your finances. 

As I watch other people try to coordinate tax planning strategy between their CPA and CFP, it doesn’t look like the most efficient way to go about this.  And if you love your current professionals, no problem.  I’m just relating what I’ve seen in the past and something new that I’m trying. 

Who knows?  Maybe this turns out to be a disaster, but I’m hopeful it will have the opposite effect. 

In a nutshell, this is also simplification at its best. 

The older I get, the more complex my taxes and tax planning strategy have become.  I am considered a high earner so this area is even more critical for me (plus living in CA doesn’t help).  Once I start getting into estimated tax payments, back-door Roth IRA conversions and restricted stock as a foreign financial account, I need to make sure I am documenting everything correctly.  Plus, being able to talk to one person about all of my accounts and taxes not only saves me time, it gives me greater confidence that my finances are being handled well.

I only have to tell one story once. 

Alright Q-FI, I get the CPA and the tax strategy, but why go all the way with the CFP?  People in the FI community know how to manage their money.  We can optimize and do everything ourselves.  So why the added cost?* 

The answer for me, really comes down to one thing… bigger life decisions. 

Now that I’m looking into buying a house, having a baby or adopting, I need to make sure my family is secure.  These are bigger decisions than in the past that are affecting other people besides myself. 

Hence, why I like having a second opinion about how I will tackle these problems.  Also, I’m a finance guy, I understand these things.  But how well I communicate them, can sometimes be lost in translation.  So, in another way, my CFP helps simplify these concepts for my wife as well.  And as we all work through the issues together; it teaches me how I can better convey these concepts to her. 

One area that my CFP has been most helpful so far is insurance.  While I’ve done a great job saving and investing, making sure I have the right insurance coverages for black swan events was something that I never fully understood. 

Now, you can argue, well Q-FI, what are the chances of that… and insurance just preys on your fears?

That’s true, but if the price is only a little to get a whole lot more coverage, then that’s some piece of mind I’ll take.  Plus, insurance isn’t just about my risk tolerance.  It’s about my wife’s as well which isn’t as high as mine.  So sometimes insurance can bridge that gap to come up with a policy that makes everyone feel comfortable.  I’ll be writing another article on this topic shortly as well. 

So there you have it.  With the dawning of 2020, there has come a big adjustment for me. 

But when we change, we document it on this blog and let people know.  Because the journey should be transparent. 

We’ll see how my taxes play out over the next few months and I’ll report back soon on how my new guy is working out. 

Have a great Super Bowl Sunday everyone! 

-Q-FI 

P.S.  Do you use a CPA to do your taxes?  Do you have a CFP?  Why or why not? 

*(I’m mostly a fan of a fee-only structure, but if you want someone to manage everything for you then the assets under management model can work too – you’re just going to be paying a pretty penny for that service with a % of assets managed fee.  But I do see older people who don’t know anything about their finances and want to continue to not know anything about their finances go this route.  Which is fine, to each their own.)