Love Your Accountant, Part II

By Tom Sedoric & Casey Snyder, Wealth Managers

Not unlike songs played on a golden oldies radio station, we believe certain retirement fundamental hits are worth repeating. In our case, as we approach the end of tax season we will repeat a mantra with increased importance: Appreciate your accountant.

It's easy to take accountants and tax experts for granted when it comes to retirement savings. While financial firms promote liberally – accountants are rarely, if ever, in the spotlight even as taxes typically remain a retiree's greatest lifetime expense.

It is a mistake to ghost the important work your accountant and tax experts do for your balance sheet for many reasons. Early last year, we talked about the shrinking supply of accounting and tax professionals. If anything, the exit trend in the United States has accelerated due to career changes, fewer students in university accounting programs because these professions are no longer considered "cool", and many in the field are retiring. Slowly and surely, this exodus is having a profound impact on firms of all sizes. Dan Geltrude, the founder and CEO of New Jersey-based Geltrude & Company, talked recently with Yahoo Finance about the impact of the situation.

"…My firm is nothing special in this regard in that we're at a point where it's not just about our ability to grow as a firm, it's about being able to handle the current workload," Geltrude said. "Over the last two years, 300,000 accountants have left the profession. So that leaves a huge hole here to be filled. And as you know, regulations and rules just keep increasing. So there's more responsibilities on accountants to get their work done. Yet, we have significantly less people to do the work. So it's really become a problem."

This acute and developing crisis was also highlighted in the Wall Street Journal at the end of last year.  The title of the December 28th page one article was: "Why So Many Accountants Are Quitting".  The prognosis for investors and the general public is far from rosy. Losing 300,000 tax professionals represents approximately 17% of this well-trained profession.

Rules and regulations do keep increasing. In this context alone the growing shortage of accountants and tax specialists is serious business. Andrew Woolridge, a global business columnist for Bloomberg Opinion, took a dark view in a November column in which he stated that nothing less the fate of capitalism itself was at stake.

"Capitalism can't function without a healthy system of accounting," he wrote. "The breakthrough from feudalism to capitalism in Renaissance and Reformation Europe was only made possible by the emergence of professional accountants. And a dearth of accountants — or a dearth of respect for accountants — has spelled trouble ever since."

The fate of capitalism is beyond our purview, but it doesn't take a crystal ball to foresee the potential damage of a continued accountant shortage. What we can do now is help our clients maximize tax efficiencies – tax loss harvesting and tax swaps, and disciplined asset location are just two examples. In 2022 alone, and similar to the actions we took during the Great Recession of 2008-9, our team executed over 11,000 client transactions, many of which were swaps aimed at improving tax efficiency. As a result, the potential tax savings for clients could be significant.

To be clear, we don't give tax counsel, and the tax professionals we work with only provide general financial advice. But the best partnerships work hand in glove and without any bias except that which benefits the client. These relationships have evolved as the new rules and regulations evolve. For years, the push towards tax-deferred plans was considered almost biblical in its application. Common sense has challenged this conventional wisdom: is it better to take a smaller tax hit now (using a Roth conversion as an example) or pay a larger tax rate down the road when you're in the distribution phase of your retirement? 

We work as closely as we can with our clients and their accountants, and continuously stress that good accountants and tax experts are an integral part of a smart investment and retirement planning strategy. We also emphasize this truth time and again. Outside of the specialized medicine sector, the best accounting practitioners tell us truths we often don't want to hear but must. They want to help us. 

Accountants help us navigate the tax labyrinth by deciphering the bewildering signals of our tax code. We should never take those talents for granted. Be sure to show some love to your accountant.
 

The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.

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