In this video, I’m going to explain why your CPA and your financial adviser could be costing you $50,000 a year.
Now, before you click off the video and think I’m saying this just to be controversial, hear me out. You probably have a CPA you trust, and you may have a financial adviser you’ve worked with for years, and they’re both smart, competent professionals. But what if I told you the way they work separately is a big problem. I see this all the time with new clients that come to us, these two are working in completely separate silos. The CPA is looking at this year’s tax bill and the adviser is managing investments without any tax awareness, and nobody is coordinating the big picture. A lot of people think their CPA is proactively planning for their financial future. In reality, they’re just filing your taxes. There’s nothing proactive about it. It’s just reactive paperwork filing. So I’m about to break down the fundamental conflict between a CPA and a true financial adviser, show you how much money this disconnect could really cost you, and explain what integrated financial planning really looks like. Let’s get into it.
All right, so let’s get right to the core of the problem. Two very different timelines. A CPA’s primary goal is to minimize the amount of taxes you paid this year. Their focus is almost entirely on the immediate 12-month window. And in that context, their advice makes sense. But the goal of a real financial adviser is to minimize your lifetime tax bill. This is a multi-decade process, not an annual one. And sometimes to pay less in taxes over your lifetime, you actually might need to pay more this year. This is a concept that traditional backward-looking CPAs never recommend because it goes against their core objective. Your CPA is looking at this narrow one-year lens. They’re trying to get you to pay as little in taxes in 2026 as possible. As an adviser, we want you to pay as little as possible over your entire lifetime. They’re completely different strategies, but one is a lot more effective than the other, and one even saves your kids more money after you pass.
A Roth conversion is a perfect example. You’re choosing to pay taxes now, but a lot of times what this does is it keeps you from paying taxes in a higher tax bracket later. And this goes against what any CPA would recommend that’s doing year-by-year planning because you’re increasing your taxes this year. But when you zoom out and look at the big picture, you see that if I do that, I’ll be at a lower tax bracket later and it will drastically reduce my lifetime tax bill.
Now, if you’re watching this and you’re a little concerned your team isn’t on the same page, you’re not alone. This is one of the most common and costly issues we see with new clients. We believe that your financial adviser, your CPA, and your estate planning should all be working together from the same playbook. If you’re a high net worth individual and you want to see what a truly integrated strategy could look like for your family, let’s have a conversation. Click the first link in the description to book an introductory call with us.
So let’s put some real numbers to this. How does this disconnect actually cost you money? It’s not one single mistake. It’s a series of missed opportunities that compound year-over-year. For business owners, it could be like using a SEP IRA instead of a solo 401k with a cash balance plan, which allows for much larger tax deductible contributions. For investors, it’s things like not having the right tax loss harvesting strategy or not having your assets located in the right types of accounts. These might seem like small details, but they add up.
A well-managed portfolio should be systematically harvesting losses. With a $5 million portfolio, you can easily expect six figures of losses a year, and you’re going to be over 20% capital gains rate. So that’s $20,000 a year. By tax loss harvesting, this is going to increase your growth rate compared to other less tax efficient investment strategies and allow you to compound your wealth faster.
Another important aspect is asset location. You want your most tax efficient investments outside of your IRAs and Roth IRAs, and you want your least tax efficient investments inside of your IRAs. Things like corporate bonds and private credit should be in your IRAs. Individual stocks, ETFs, direct indexing, and long-short tax loss harvesting should be held in your non-qualified accounts. Very important that you coordinate these strategies because this will make a big difference in growing your long-term wealth. We often see clients come to us with the wrong investments in the wrong types of accounts. They have fixed income and hedge funds in non-qualified accounts, and the tax drag is tremendous.
The best thing about tax efficiency is it’s something you can control. You can’t control market outcomes, but you can control the tax efficiency of your portfolio. And if you do that, you’re going to add a lot of long-term wealth. We often see a lack of asset location, which results in a tax drag of 0.5% a year. That’s $25,000 a year on a $5 million portfolio, which is a big difference.
One of the biggest mistakes is missing Roth conversions in your low income years. Not only does this cause your RMDs to be much larger and cost you a lot of money in taxes, it also costs your kids a lot of money in taxes. This is one of the biggest mistakes we see people make, not converting their IRAs to Roth in the low tax income years, typically the years between when they retire, when they claim social security, or when their RMDs begin. This is easily a $10,000 a year mistake. We’re already over $50,000 a year from just three common mistakes. This isn’t a one-time cost. This is a leak that’s draining your wealth year after year.
This gets me to another critical distinction and one that advisers often get wrong, the difference between tax deferral and true tax savings. Tax deferral, like contributing to a 401k or an IRA, is a great first step. You get a tax deduction today and the money grows without being taxed along the way, but it’s not tax free. You just push the tax bill down the road. True tax savings comes from a plan to actually manage when you pay those taxes. The goal is to defer taxes when you’re in your highest earning years and strategically realize those taxes when you’re in lower tax brackets with distributions or Roth conversions. This requires a multi-year forward-looking plan that coordinates your investment strategy with your tax strategy.
Typically, clients are in drastically different tax brackets throughout their life. When they’re working, they’re in a much higher tax bracket, and then when they retire, they’re in a much lower tax bracket. When you’re in your peak earning years, you want to defer taxes and save pre-tax, 401ks, cash balance plans, etc. But then when you retire, you have windows where you’re in a much lower tax bracket, maybe before social security starts or before your required minimum distributions start. This is when you want to utilize Roth conversions and distributions. The strategy is simple in concept, you defer taxes when you’re making the most money and then you pay taxes when you’re in lower tax brackets with Roth conversions and distributions. But it takes a disciplined process. That’s how you turn simple tax deferral into true permanent tax savings.
A couple of additional points that are really critical in tax planning. The first is your distribution strategy, where do you pull money from first? Typically, you want to take money out of your non-qualified accounts first because those are the least tax efficient accounts. Money you leave in your IRAs and Roth IRAs grows without paying any taxes, so you want to draw down your non-qualified assets while doing Roth conversions.
Another key point is that not all accounts should be invested the same. Your Roth IRAs are going to be the last money you touch, so you want to have the highest growth assets in those accounts. And you want your distribution strategy to coordinate with your social security strategy. If you claim social security at 62, that’s earned income and it doesn’t allow you to do as large Roth conversions. If you delay social security till 70 while drawing down your non-qualified assets, that gives you more room to do Roth conversions.
To recap, pull money from the least tax efficient accounts first. Coordinate your distribution strategy with your social security claiming strategy. Be a little more aggressive in your Roth IRAs because that’s the last money you’re going to touch, and you want that money to grow more over a longer time frame. This is how you coordinate a tax efficient distribution strategy.
So you have a CPA and a financial adviser. That’s a great start. But the real question is, are they talking to each other? Are they working on a cohesive plan to reduce taxes over your lifetime, not just this year? Because if they’re not, you could be leaving tens of thousands of dollars on the table every single year. This isn’t about someone doing a bad job. It’s about the cost of an uncoordinated strategy.
If you’re ready to have a conversation about what a truly integrated plan could look like for you, click the link in the description below to book a call.
