Canada, and specifically , Chartered Accountants (“CA's”) have independence restrictions and other rules that prevent us from providing specific security advice and from buying and selling securities on behalf of our clients. Ontario
, we are allowed to earn a fee for providing what I will call quarterbacking advice, where we oversee a client’s team of advisors and ensure a comprehensive team plan is put in place and maintained for each client. As financial quarterback, we try to ensure the client’s investment advisor, lawyer, insurance agent, banker, business consultant and accountant have integrated their advice into one efficient, optimum, co-ordinated plan, taking into account the client’s investment, retirement, income tax and successions needs. Ontario
In providing that role within my firm, Cunningham LLP, I have seen clients with investment portfolios and financial plans that fail to consider their needs, miss out on crucial income tax savings and clearly lack a strategic vision. Lost opportunities are created when advisors operate in silos and the situation is made worse when advisors operate at cross purposes, and worse still when they are concerned only with their own fiefdom and fees. In this blog I would like to discuss why you may want to consider nominating one of your advisors as the responsible party for co-ordinating and quarterbacking your other advisors, or if you are up to it, tackling the quarterback job yourself.
There are many professionals who can quarterback your team. The two that seem most appropriate are a fee-for-service financial planner and your accountant. In my biased opinion, I would suggest that in many cases, a client’s accountant may be the best suited and most independent advisor because we often have the broadest vantage point of our client’s wealth and financial picture. But, this is not to say your investment advisor, whether a fee-for-service advisor or not, would not be suitable for the task. Some of the issues and reasons you may wish to put one of your advisors in place as your team’s quarterback are discussed below.
In many cases, I have observed that my client's investment advisors pay little or no attention to my client’s actual business affairs; other than to determine how much cash can be transferred from their corporation's to the investment accounts they hold for that client. So why does this matter? Because the client’s business is most often their largest asset and in many cases is the asset with the most risk. For example, two years ago I had a very successful parts supplier who as the recession began, was told by one of his major customers to halt shipments for a time. His business was in a high risk situation. His advisor had a significant portion of his portfolio in equities and never once considered the risk associated with his business in determining his asset allocation. How about a person who makes their money in real estate; should their advisor have any of their portfolio in real estate stocks? Maybe or maybe not, but the lack of diversification and resulting increased risk of holding real estate stocks in this scenario should be considered, and as I say, it is often totally ignored. In addition, the income tax consequences of investing are such that the investment advisor should always co-ordinate with an accountant.
My client’s insurance advisors are a mixed group. Many are excellent and ensure they speak to me to understand my client’s needs including business structures, succession planning and income tax issues. However, the reality is many an accountant has shot down an insurance policy in their client’s best interest and some agents try to ensure the accountant is not involved when selling a policy to ensure the sale of the policy.
Lawyers are generally used to working with accountants and these professionals typically work together fairly seamlessly, however, they also typically have minimal interaction with the other advisor groups. In addition, many clients have lawyers they used for a real estate transaction or a will, etc. and they assume the lawyer can handle estate planning, US vacation home planning or similar other transactions not in their wheelhouse. I have seen several messy situations caused by real estate lawyers who decide they are probate planners and cause substantial deemed dispositions of real estate assets for income tax purposes. Again, if the lawyer was working as part of a team, they would have known to contact the accountant or tax lawyer before implementing any transaction.
Your financial world is a complicated place and where you have a team of advisors it is essential to get them all on the same playbook. You will typically be better able to achieve your key objectives in this way while ensuring the efficiency of professional fees.