I need a little guidance from the S2K community to help me understand the difference between an accountant and a financial advisor. Also, I'm trying to figure out which one I need.

Every year I do my taxes with turbo tax, and I'm not satisfied with it. I keep wondering how some people can get away with paying very little taxes. There must be some information out there about how to structure your investments to minimize your taxes. Also, I think there must be tax "loopholes" that I am not taking advantage of but that I should.

First, all the accountants I know are the H+R Block type. You usually see them once a year and they just type your info into the H+R Block software (which is just like TurboTax). I don't see any added value in that. I think you should be in contact with your accountant or advisor many times throughout the year. Am I wrong? Are there better accountants out there?

Second, I would like someone to say to me things like...."Hey, given your business investments, you should setup a LLC and claim part of your residence as your office to save 25% on taxes. Buy your car under the LLC title as well, and then you can deduct the car payments as a business expense. Also, you have too much cash this year, so go invest in another house."

I just made up the stuff above, and I don't if it's good advice, let alone legal to do what I just said. The point is that I need someone to guide me better than a software program can.

Presently, I have no real estate investments, but I do own a good chunk of stock and mutual finds. I'm 25 and I have no debt. I make a lower middle class salary and I have no children. I would like to get to a place where I'm managing my money smarter and making "advanced" financial investments year after year.

Should I get an accountant or a financial advisor given my life situation? How do I find a great accountant / advisor? Do they usually charge a retainer?

Thanks for your help.

 

There is a bit of a gray area between financial advisors and tax accountants. I work in the financial industry and can only disclose information on how our financial products effect taxes. We are not allowed to go beyond that and offer more tax help. That is where a tax advisor comes in.

For example, I can say this 401(k) product will help you reduce your income taxes because it is a pre-tax retirement plan. But you will be accessed federal income taxes once you withdraw from the plan. But consult a tax advisor when you withdraw so you know how this income affects your income bracket during tax season.

A tax advisor can recommend some investment vehicles to help reduce income taxes, but will be unable to help you plan too much with college or retirement planning. Or sell them to you as well unless they have financial and tax licenses.

So, you will need a financial advisor to help you plan for your long or short term investing goals. And a tax accountant to help with a tax plan.

 

To be perfectly honest, with your current situation, you don't need a tax advisor or financial planner. With the availability of resources and information out there, if you so desire to take the time to learn, you can learn enough information to figure out the best investments to get into and the best ways to minimize tax liability. Now, if you dont have the time or inclination to learn, then yes, find yourself a financial planner. They usually are at least somewhat aware of the various effects that certain investing and financing activities have on taxes.

Since you invest in stocks, are you to least vaguely aware of how capital gains tax works? Also, finding out information on how to reduce tax liabilities can be found in all sorts of sources from books to internet resources.

If your situation was more complex, meaning if you had much more diverse assets and varying liabilities, then yea I woudl say get an advisor. But for now, you can easily educate yourself.

 

An accountant can help you crunch numbers, a financial advisor (depending on the financial advisor) can do that and more. Planning for any financial needs in the future (retirement, buying a home, starting a family, continuing education...etc.), utilizing tax benefits, planning for an estate (although primarily done by an estate attorney), investment ADVICE, etc.......pretty much almost anything and everything that concerns money

i'm a financial advisor for waddell & reed so i know the many benefits of having a financial plan (of course it also makes me a bit biased ) just make sure you do some research if you plan on choosing an advisor...i tell people its like choosing a family doctor, you really want someone that you can work with and trust so "shop" around for the right advisor

if you need any more info, feel free to pm me. good luck!!

 

and yes, whether you have an advisor or accountant, you should expect to have an ongoing relationship with them, and the advisor or accountant should as well...like i said, its similar to choosing a doctor, unless you're the type to see a different primary care physician every time, which imo is