Share this content
Three business people sit around a desk having a meeting.
iStock_sanjeri_Businesspeople in Meeting

Does Your Client Need a Financial Advisor?


If you're an accountant with clients who see a financial advisor, you may be wondering whether they're paying for a service they don't need or whether you need to collaborate with their other advisors. Bryce Sanders of Perceptive Business Solutions discusses which clients usually do or don't need a financial advisor to start their financial plan.

Jan 6th 2022
Share this content

What’s a financial services professional's greatest fear? The COVID-19 pandemic last forever? Another lockdown? A 20-percent decline in the stock market? No, it’s their client’s accountant asking the client, “Do you know how much you paid your financial advisor? What do they do for you?” Perhaps you have even asked these questions of some of your clients.

Local accountants in private practice offer different levels of service. You might offer financial planning as an advisory service. Maybe you don’t, and some of your clients work with financial advisors at a large firm or a registered investment advisor (RIA). Getting advice and completing transactions comes at a cost. Are your clients paying for a service they don’t need? As a fiduciary, you are in a good position to provide guidance.

Remember when the Treasury Secretary and the IRS announced a new postcard-sized form 1040 to simplify filing tax returns? If you are a salaried employee earning only W-2 income, living in a rental apartment with neither a spouse nor children, this makes great sense, and you likely wouldn’t need to pay an accountant to file your taxes. However, plans for a postcard-sized form have been scrapped, and clients still need help with state and local taxes.

Which Clients Can Manage Their Own Investments?

The basics of investing don’t appear complicated. Actor and humorist Will Rogers once said, “Don’t gamble. Take all your savings and buy some good stock and hold it until it goes up, then sell it. If it don’t go up, don’t buy it.” For some people, following this advice might work, and they can manage on their own, at least for now. Here are the types of clients who may be able to manage their own investments:

Early-stage retirement investors. These clients are young and recently graduated from college. Their only investment activity is putting money into their company’s 401(k) plan. They might also have an IRA account with a plan that either preassigns an asset allocation or provides a series of choices. These clients likely have a benefits consultant at their company who can offer advice. 

Investors just betting started. These clients are young, and their parents likely told them they should be investing. Perhaps they contacted an online brokerage firm and arranged for a monthly direct debit that goes into that firm’s robo-advisor account. These clients get asset allocation and rebalancing on an automatic basis, and they see no need to micromanage.

The person with a smart friend. This smart friend is often a parent or someone whom the client trusts who has experience investing. Perhaps the parent tells their child to put money away monthly and even tells them exactly what to buy. These clients are happy to follow these simple instructions. They don’t need an advisor because their parent is their defacto advisor.

The buy-and-hold investor. Years ago, when municipal bonds paid higher rates of interest, investors would simply buy 30-year bonds and hold them to maturity or until they were called; they had no interest in trading. Others will find a stock with good prospects, buy it and then forget about it. Warren Buffett once said, “Our favorite holding period is forever.” These clients have no intention of being stock traders.

The person passionate about the stock market. These clients love investing, and they stay up all night researching companies in minute detail. They even attend company shareholder meetings. These clients love the stock market, and it consumes much of their free time. They are self-taught experts.

People employed in the industry. These clients may not be financial advisors themselves, but they are part of that world. Perhaps they teach financial planning at the university level. They may possess the same skills as the advisor, but maintain a clientele of one person: themselves.

Which Clients Should Get Professional Help Managing Their Investments?

While professional help is often a euphemism for seeing a psychiatrist, that’s not the case here! Certain people would benefit from professional help in outsourcing their investment activity. Here are the types of clients who should consider this strategy:

The person with complicated finances. These clients are typically executives who own restricted stock and stock options. Perhaps their firm considers them a control person. They may have a concentrated stock position, and they need diversification.

Executives approaching retirement. For these clients, work has been their life, and they haven’t paid much attention to their investments. Soon, they will be leaving their job, and perhaps they will consult afterwards. They may have little idea how much they spend or where their assets are, and they need someone to get them organized.

The know-it-all person. These clients need to be the smartest people in the room. While they have a lot of knowledge, they may not have the time or the attention span to follow through or take action. 

The very busy person. Making money and managing money are two different skills. These clients are great at their jobs; they might be corporate lawyers, professional athletes or celebrities. The more time they devote to their profession, the more they earn. Managing their own money takes away from time that could be spent doing the work that pays the bills.

The easily scared person. These clients may panic when someone on television says the market is plunging and then want to sell everything. They may be euphoric when the market is doing well and then borrow money so they can invest more. These clients need someone who will take the long view and reassure them.

The person who thinks investing is gambling. While these clients might not admit to having this view, they act on it. Perhaps they are trading on their cell phone all the time. They may not understand what they’re buying and use phrases like, “easy come, easy go.”

The person who can’t be easily reached. Because of their jobs, these clients are not in touch often. Police officers are a good example, as are people who work at sea and people who work in environments where personal calls are discouraged. These clients would benefit from an advisor who can meet with them periodically.

The person stuck in one place. These clients earn money, spend money and invest or think they manage their own money, but their assets never seem to grow. They would benefit from financial planning and structure.

If the profiles in the second section sound familiar, they are people you can help. While those in the first section might need help in some areas, investing isn’t one of them, at least not yet.