Most of the time, a tax preparer may be the only relationship most people have with someone who knows about taxes and financial planning. For example, who else would they ask about buying or leasing a car or house, 529 plans, and whether they are saving enough for retirement?
However, without financial planning and analysis education, many tax pros may respond to these questions with canned or Googled responses, and knowledge derived from anecdotal experience. Even worse, they may avoid or never provide any answers.
Tax preparation and planning is an easy jumping off point into financial planning. There is an established trust between a tax pro and their clients, so it’s not a huge leap for clients to seek assistance on a holistic financial plan. The skills of financial planning will take any tax professional to the next level in professional development, expanding their firm and knowledge exponentially.
And, who knows? Adding expertise areas, including budgeting, retirement planning, education funding, estate and gifting to your services may lead to investment and insurance advising. If you have a limited background, start by taking a couple of courses in personal finance; many of the skills a financial planner needs are learned in this coursework. Continuing education can be very helpful when looking to expand your services, especially with financial planning for clients.
Personally, every time I deliver a tax return, I ask my clients three basic questions. Do they have any big goals for this year? How are their retirement accounts? How is their rainy day fund? These three topics will give you some insight into the foundation of every person’s financial status.
- Big goals: This topic will generally be answered in a couple of major themes: vacation, major purchase (house or car), life event (wedding or baby), or nothing planned. Keep in mind that each of these, even the “no big goal planned,” can generate follow up questions specifically related to finance.
- Retirement: Discussing retirement is almost always a foolproof method to score a follow up session because no one has enough money to retire. Even if clients think they are saving enough, the savings usually isn’t earning its perceived potential. This is also the area to have succession planning conversations with your business clients.
- Rainy day fund: If retirement isn’t top of mind, then discuss their savings. On average, only 18 percent of Americans have any sort of emergency fund.
The goal with these questions is getting your foot in the door to gain interest in having a follow up financial planning session appointment or a planned contact after tax season.
Financial Planning as a Service
Financial planning is not a one- or two-hour conversation. Depending on your experience and resources, a solid plan will take several hours of your time to complete, and also requires your clients to spend time on the plan. The most time is spent gathering the relevant information to build the plan.
Financial planning is not a one-and-done service like tax preparation; there are follow up conversations, and ongoing semi-annual or annual reviews to keep your revenue flowing throughout the year.
Words of Advice
- If you don’t know an answer, don’t pretend or guess. Research the answer and provide the most correct one to the client. It’s okay to say, “I don’t know, but let me find out the answer for you.”
- Build relationships with other professionals, including investment advisors, insurance agents and attorneys. You want to be in the position to recommend a professional instead of making the client find their own.
- DO NOT PROVIDE ADVICE if you are not licensed to do so in your state. Be mindful of the rules of what constitutes advice, especially investment advice.
- Financial planning is not like tax prep; you can’t complete a financial plan in 15 minutes, so adjust your rate accordingly. Be competitive, but remember tax clients are seasonal and financial planning clients are for life.
Financial planning can be a rewarding path, not only financially, but in your personal development by building your knowledge and business. There are a lot of additional avenues that can open with financial planning, including becoming a Certified Financial Planner®. Being able to add this invaluable skill to your repertoire will not only benefit yourself, but your clients will come to know you as their most trusted advisor. You will be more than a tax preparer; you will be someone looking out for their financial wellness!