The red flag that shows your financial adviser isn't doing their job
MANY people rely on a financial adviser for sound advice, but the adviser who doesn't talk to a client's accountant and solicitor could be a red flag, experts have warned.
Accountants, solicitors and financial advisers provide expertise and advice in their own areas.
For example, a financial adviser might be dealing with investments and pensions, the accountant handling tax, while the solicitor looks after trusts, wills, property or business matters.
However, selling a business, buying property or setting up a trust could create a chain reaction involving tax, investments and inheritance planning.
Experts told Newspage this is why communication between your professional advisers can be so important.
Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning, said: "Clients shouldn't have to be the messenger between their financial planner, accountant and solicitor. With the client's permission, I regularly work directly with their other professional advisers. This becomes particularly important with business owners and high-net-worth clients, where a pension contribution, company withdrawal, investment, gift or trust decision can have consequences elsewhere.
"The biggest risk when professionals work in isolation is that each piece of advice can be perfectly reasonable on its own but conflict with the wider plan. I've seen situations where decisions could have been structured more tax-efficiently if everyone had spoken beforehand.
"Clients shouldn't be expected to understand every interaction between pensions, tax, businesses and estate planning. That's part of our job. The biggest barriers are often surprisingly simple: time, professional silos and nobody taking responsibility for coordinating everyone. Good financial planning should join the dots.”
According to one financial professional, bringing these different areas of expertise together can help clients avoid costly mistakes and ensure decisions work across the board.
Michelle Lawson, Director at Fareham-based Lawson Financial, added: "Collaboration between such parties is important as one decision may directly or indirectly affect the other. For instance, changing the structure of a property portfolio may be tax-efficient but may not be practical or cost-effective for lending.
“Each party has a different role to play but the end goal and outcome isn't always a direct reflection. Equally, with the relationships I have built it enables me to run potential outcomes or changes past them before making costly moves or errors and ensure my clients get the best advice and possible outcome.”
Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said this joined-up approach is already proving valuable for clients, with advisers working together to ensure financial, legal and tax planning are properly aligned.
He said: "I’ve literally just walked out of a solicitor’s office discussing mutual clients, with their consent, to ensure their financial planning properly connects with the legal and tax advice. Clients increasingly value this joined-up approach. Your financial planner, accountant and solicitor may be independent firms, but they shouldn’t operate in silos.
“Estate planning, business succession, pensions, tax and investments frequently overlap. The best outcomes come when advisers understand the whole picture, agree who is responsible for what and work towards the same objectives. For clients, that can mean fewer gaps, less duplication, better tax outcomes and, ultimately, better decisions."
Scott Gallacher, Director at Leicester-based Rowley Turton, said advisers make life easier for clients when they work together, but also help prevent costly mistakes when financial, tax and legal advice overlap.
He revealed: "We often work directly with clients’ accountants, solicitors and tax advisers. With the client’s permission, our aim is to make their life as easy as possible, reduce duplication and minimise the risk of errors or miscommunication. I have seen how important that can be. One client approached her solicitor, following our guidance, to prepare a deed of variation creating a discretionary trust for the benefit of herself and her children, while keeping the assets outside her estate for inheritance tax purposes.
“Unfortunately, the drafting risked excluding her from benefiting from the trust. Thankfully, she sent us a copy before signing. Clients should not be expected to join the dots themselves. A good financial planner should help coordinate pensions, tax, business and estate planning, bringing the right professionals together. What gets in the way? Often data-protection concerns, professional silos and uncertainty over where one adviser’s responsibility ends and another begins.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said clients should not be expected to know when pensions and other investments “collide”.
She added: "I am very pro professionals working together. With the client’s permission, I will speak directly with their accountant, solicitor or tax adviser whenever one decision could affect another area. Clients should not be expected to understand where pensions, tax, business planning, investments and estate planning collide. That is our job. The expensive mistakes usually happen in the gaps.
“A pension withdrawal can create an unexpected tax consequence. A gift can affect estate planning. A company decision can completely change the most sensible financial strategy. The biggest barrier is often siloed advice. Everyone does their own piece brilliantly, but nobody joins the pieces together. I think that model is outdated. The client should not have to act as courier between four professionals who are all advising on the same financial life. Good advice is not just technically correct in isolation. It has to work with everything else around it."
The same concern is shared by Paul Denley, CEO at London-based Oakham Wealth Management. He believes clients should not be left to instruct different advisers themselves when financial, tax and legal decisions overlap.
He said: "Clients shouldn't have to act as the postman between their professional advisers. With their written consent, usually agreed at the outset, we regularly speak directly to accountants, solicitors, and tax advisers when decisions overlap.
“The costliest mistakes are often not bad advice, but good advice given in isolation: a pension withdrawal that triggers the 60% tax trap, or a gift made without considering the CGT or estate planning consequences. Clients cannot reasonably be expected to join all those dots themselves. What gets in the way is usually time, confidentiality, and professionals naturally focusing on their own brief. Someone needs to own the joined-up picture, and clients should know exactly who that is."
ENDS
Here are the original questions we put to Newspage's experts
- Do you work directly with clients' accountants, solicitors and tax advisers? When, and with what permission?
- Have you seen costly mistakes because professionals weren't talking to each other? What happened?
- Should clients be expected to spot the connections between their pensions, business, tax and estate plans themselves?
- What stops professionals working together more often?
