When it comes to working with accountants, there are a few common beliefs that need to be debunked to help you avoid making costly mistakes.
MYTH OR FACT: DENTISTS MUST WORK WITH A SPECIALIST ACCOUNTANT
A specialist is always going to be more valuable than a generalist because they have deep industry knowledge and experience in their particular specialisation. Therefore, the question really should be, is accounting and taxation advice for dentists that different to other occupations?
The answer is; yes, it could be. The problem is; you don't know, what you don't know, until you know. Therefore,
it is possible for a dentist to engage a generalist accountant and not experience any issues – particularly if their situation is very simplistic. However, a generalist accountant might not identify certain risks or opportunities due to their lack of experience. So, if you want the confidence that nothing is being missed, it makes sense to deal with a specialist accountant.
In addition, one other benefit of dealing with a specialist accountant is that you will be able to learn from other people's mistakes. Over the past 17 years of advising dentists I've seen the good, the bad and the ugly. For example, we are often approached by prospective clients that have got themselves into a pickle as a result of poor decision-making or bad advice. This serves as a great lesson to us which we can utilise and help our existing clients avoid repeating the same mistakes. As the saying goes, we are all smarter in hindsight.
IT'S OKAY TO SEEK INVESTMENT ADVICE FROM YOUR ACCOUNTANT
Accountants are often ranked as highly trusted advisors (compared to other professions). There are many reasons for this but probably the biggest factor is that most accountants don't have any conflicts of interest (i.e. they charge a fee for this service and typically don't receive any other benefits). Therefore, it stands to reason that when clients are faced with an important financial decision, they would seek advice from their accountant.
However, accounting/tax advice and financial advice are two very different things. An accountant typically spends most of their time analysing the last 12 months and thinking about the next 12 months. Whereas a financial planner spends most of their time thinking about the longer-term future e.g. developing an investment strategy for the next one or two decades. As such, these roles typically require different approaches, experience and skill sets.
For an accountant to be able to provide you with financial advice, they would need to be licensed (hold an Australian Financial Services Licence). Most accountants do not hold such a license. Therefore, legally, you must check whether your accountant is licensed to provide financial advice. Secondly, it is important to consider the accountants level of experience (both personally and professionally) with respect to the investments that you want advice on.
Typically, an accountant isn't the best person to provide financial advice.
ACCOUNTANTS SHOULDN'T INTERFERE WITH YOUR FINANCIAL PLANS
Some clients keep their accountant in the dark. That is, they rarely share their future plans, talk about their concerns, risks and so on.
This is a mistake.
Accountants typically have a lot of experience to share. It's important they understand what your future plans might entail. They might be able to make recommendations to help you plan around the tax consequences, structure ownership and take steps to protect your asset. Again, they can help you avoid the mistakes they've seen other clients make.
Whilst accountants aren't financial planners, they do very much have a complimentary skill set. It is therefore in your best interest to be very transparent about your future plans so that they can add value when and where necessary.
For more on this story, please go to News Bulletin Online (April issue)
