Investment advisor/tax advisor/preparer hybrid?

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Tyr0ne
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Investment advisor/tax advisor/preparer hybrid?

Post by Tyr0ne » Tue Mar 26, 2013 2:47 am

This may be a silly question but how come I never hear about advisors (whether private practice, investment banks, brokerage houses, etc.) who act as both investment advisors and tax practitioners? I'm assuming this is against the law, as it would be a surefire way to attract clients, both big and small. So perhaps my question is why is this not allowed? I don't see why any sort of conflict of interest has to exist, as long as the advisor/practitioner is bound to act as a fiduciary and holds the proper licenses/CPA. Is this something that may be in our future? Thank you to anyone who can shed some light on this!
Last edited by Tyr0ne on Tue Mar 26, 2013 2:37 pm, edited 1 time in total.
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ObliviousInvestor
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Re: Investment advisor/tax advisor hybrid?

Post by ObliviousInvestor » Tue Mar 26, 2013 7:40 am

It's not against the law. Plenty of CPAs with the PFS ("Personal Financial Specialist") designation give investment and tax advice*, as do many CFPs.

*If a CPA's investment advice is "solely incidental" to their accounting services, they are not required to become an RIA (Registered Investment Adviser). So some do it that way, keeping the investment advice to a minimum. Others go ahead and become/form an RIA.
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rustymutt
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Re: Investment advisor/tax advisor hybrid?

Post by rustymutt » Tue Mar 26, 2013 7:50 am

Plenty of tax attorneys with financial backgrounds. I can't afford them.
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MN Finance
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Re: Investment advisor/tax advisor hybrid?

Post by MN Finance » Tue Mar 26, 2013 9:19 am

IMO, typically the two roles are best separated so that the investment advisor doesn't also do taxes. The areas each require enough expertise that one person may not want to become an expert on both sides. We have a couple advisory firms in town that have a CPA on staff. I don't use them, but usually send friends there and the experience is high level because there's collaboration between investment and taxes. I don't know why more don't do this, but my assumption is that taxes are low margin, high volume work and investments are high margin, low volume work, so they don't work well together from a business model standpoint. It's a good fit for RIAs who want to hire a CPA, but probably not enough revenue in it for wire houses or product sales firms

rocket
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Re: Investment advisor/tax advisor hybrid?

Post by rocket » Tue Mar 26, 2013 10:54 am

Tyr0ne wrote:This may be a silly question but how come I never hear about advisors (whether private practice, investment banks, brokerage houses, etc.) who act as both investment advisors and tax practitioners? I'm assuming this is against the law, IT IS NOT AGAINST THE LAW, I DO IT as it would be a surefire way to attract clients, IT DOES NOT So perhaps my question is why is this not allowed? IT IS ALLOWED I don't see why any sort of conflict of interest has to exist, as long as the advisor/practitioner is bound to act as a fiduciary REGISTERED REPs DO NOT HAVE FIDICIARY STANDARDS, RIAs/IARs DO and holds the proper licenses/CPA. Is this something that may be in our future? Thank you to anyone who can shed some light on this!

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Tyr0ne
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Re: Investment advisor/tax advisor hybrid?

Post by Tyr0ne » Tue Mar 26, 2013 2:36 pm

Thanks for the responses. It still makes me wonder however, why a large investment bank like Goldman or broker like Fidelity doesn't have their own tax department, merge with one, or simply buy one out. I work at a tax form for high net worth individuals (some ridiculously high) and the margins aren't low from my understanding. It kills me slowly to see how messy the investment management is for some of these people, and while I don't expect everyone to adopt a boglehead type philosophy, I sure think investing/taxes would be a lot more seamless if they were done in one place, and would save these bigger clients tens of thousands of dollars.
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SeattleCPA
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Re: Investment advisor/tax advisor/preparer hybrid?

Post by SeattleCPA » Wed Mar 27, 2013 7:58 pm

For what it's worth, we (my CPA firm) used to have the all the state level licenses and certifications for acting as an investment advisor.

Two factors lead to me shutting this down:
1. State agency that regulates this stuff in Washington said to me, "Why are you even going to work of doing this? You don't need to..."
2. I couldn't ever figure out a way to get paid for time and risk in way that still meshed with my feelings about using passive approach, focusing on costs, etc.

john94549
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Re: Investment advisor/tax advisor/preparer hybrid?

Post by john94549 » Thu Mar 28, 2013 8:33 am

While I retired in 2006, I can tell you that E+O insurance is probably a factor. The carriers might as well put in bold font at the top of page one in the renewal application "Dabble in Securities Advice?" If you check "yes", they could then just ignore the rest of the application.

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