"What we have here is a failure to communicate!!" an article by David A. Townsend
Communication between financial advisors and accountants is generally good but when it breaks down, it can cost the client money! The above title definitely overstates the case but hopefully it got people's attention. And I couldn't resist the reference to one of my all-time favourite movies… "Cool Hand Luke".
For anyone who remembers the movie, you're probably a baby-boomer like me. Dealing with retirements, wind-ups, consolidations, and estate issues is challenging stuff. How do you preserve the value of assets and pass them on most cost-effectively? What information and procedures will help successors carry on effectively when you're not around? How do you best provide a good trail for others to follow?
I find clients sometimes get caught up in technical details and forget the obvious, i.e. most problems can be avoided with good communication and organization. Miscommunication will not only result in additional tax in many situations, it also will increase professional fees and stress for everyone involved. It is vital that the client, investment advisor and accountant take time to communicate and ensure that they are on the same page.
I have worked with many different financial advisors over thirty plus years. The good news is that the communication has improved tremendously in that time. Of course, technology helps but that can be a problem too… more about that later.
Most financial advisors are a pleasure to work with — organised, accessible and eager to help serve our mutual clients. I rarely encounter the response I used to hear fifteen years ago…."You're the accountant, you figure it out"…
Of course, to be fair, that response was probably triggered by my overly demanding approach. It may be stereotypical but in my experience, financial advisors and accountants have different mind-sets — the two professions attract different personalities.
Most financial advisors are wired to be positive and upbeat… they talk to people and draw them out. Accountants, on the other hand, usually just want the facts without the side issues. Both approaches have merit and the synergies can be helpful; but the different personalities can also create friction. I'll leave the psychology to someone with more experience in those matters but the client should be aware of this.
It is after all the client's assets at risk and it will be he or she who suffers. If there is not a good working relationship between the accountant and investment advisor, the client
may have to make a tough call and replace one or the other.
Enough preamble. The following are examples of problems I have encountered in my time… makes me wonder how often they slip through the cracks.
The above is not to criticize anyone. The onus for good communication has to be shared equally by all parties. In this day of tweeting, texting and e-mail, a face to face discussion often provides the best opportunity for the client to move this forward. A working lunch with your investment advisor and accountant might be worthwhile….maybe one of them will even buy…
Urge your investment advisor and accountant to collaborate! This will be in your best interests.
Note 1 — Most investment company statements provide a comparative figure to measure against the current market value of an investment. In my experience, this is most commonly called "book value" but is also referred to as "cost" or "adjusted cost base" (or some other term) depending on the investment company. The method of calculation of this "book value" is sometimes described in footnotes to the statement, but not always.
Note 2 — As a practical matter, in my experience, the CRA rarely questions capital gains or losses (other than active business investment losses). However, file a claim for $10,000 in medical and it almost guaranteed that you will be asked to produce receipts. But that is another story.