Why your financial planner and accountant should work together

One of the most common issues Paul sees with clients is that they focus on reducing short-term tax without considering the long-term consequences.

“Accountants focus on minimising a client’s tax bill year by year. But sometimes paying a little bit of tax now can create a much better outcome over the long term.”

He uses pension planning as a prime example.

In some situations, withdrawing tax-free cash early can reduce taxable income in the short term, but this can also lead to higher taxes further down the line or reduce flexibility later in retirement. This often happens because the client hasn’t blended and organised their income sources strategically over time.

A longer-term perspective can be particularly valuable for those who want to remain below certain tax thresholds throughout their retirement rather than just reducing their liability in a single year.

A financial planner can model how a client’s income is likely to evolve over decades, which may mean paying slightly more tax in the short term to help improve their long-term efficiency.

In Paul’s experience, clients sometimes only bring advisers together after they’ve already made major decisions, which may mean some opportunities are no longer available.

“Once certain decisions have been made, you can’t always undo them,” he says.

This might include:

• Making a large pension contribution
• Drawing income from a portfolio or business in a particular way
• Selling a business or other asset
• Taking pension withdrawals without considering future taxes

A financial planner may not always be on top of a client’s business accounts or recent HMRC changes, while an accountant may not consider how decisions made now could affect retirement or long-term planning. Working together helps ensure both perspectives are considered.

For business owners, the line between personal and business finances is often blurred. That means decisions made inside the company can have significant implications for a client’s long-term wealth.

Paul says collaboration is especially useful when planning how to extract money from a business, structure retirement income, or prepare for a future sale.

When it comes to business sales, early planning can improve tax efficiency. This can lead to better long-term personal benefits, such as a better-funded retirement. For example, this might include making pension contributions from company cash before a sale.

In one case, Paul worked with a client and their accountant in a joint meeting to build a retirement income plan that used income from the business, pensions, and ISAs.

By approaching the problem collaboratively, they were able to align the client’s personal goals with the business’s financial and tax position.

But without early collaboration between the accountant and financial planner, those opportunities can sometimes be missed entirely.

“It helps make sure all corners are covered,” Paul explains. “The figures are checked properly, the advice becomes bullet-proof, and it reduces the risk of misunderstandings.”

Historically, clients have typically acted as the middle person for their advisers and have relayed information between their accountant and financial planner themselves.

However, Paul says that it’s increasingly common for advisers to communicate directly, with the client included throughout the process.

That might involve:

• Joint review meetings
• Shared email communication with the client and their advisers
• The financial planner will be able to provide important information for the client’s tax return
  • Ensuring accuracy and saving the client considerable time
• Coordinated planning ahead of major financial events
• Ongoing discussions around income, pensions, and taxation

Even where no obvious issue exists, one adviser may identify opportunities or risks that the other has not considered.

Paul says, “In many cases, nothing will go wrong if advisers aren’t working together. But there’s really no downside to joining things up properly.”

Bringing both perspectives together can help clients make decisions with confidence that both their current position and future goals are fully aligned.