Should You Buy Investments From Your CPA or Tax Preparer?

by Neal Frankle, CFP ®

In just a short time you’ll probably be sitting down with your CPA to prepare your tax return.  I get that you trust your CPA. She is smart, conservative and honest.  But should you take investment advice from her?  Even if they are good at doing taxes, are they they best investment advisor for you?

Not in a million years.

Of course I am biased so please take this post with a grain of salt. I am Certified Financial Planner. I make a living helping people with their financial plans and by helping them invest their assets. CPAs who do what I do are in direct competition with me. Maybe it’s just impossible for me to weigh in on such a topic objectively…..but I’ll try my best.

I’ve been in the financial planning business for over 28 years. I see how CPAs work and think and I can tell you unequivocally (and without any reservation) that you should not use a practicing CPA to make investments for you. In fact, if your CPA sells investments it might be time to look for a new CPA or do your own taxes.  Here are the three main reasons.

1. Time

Being a CPA is a full-time job – especially from January through mid-April. Being a financial advisor is also a full-time job but for advisors, it’s year round. Do CPAs have time to watch your investments during tax season? No. Will they rebalance portfolios during tax season? Forget it. If you only need a financial planner for 8 months out of the year, fine. But if you need a planner that is on top of what is happening to your money throughout the year, don’t rely on the person who prepares your income tax return.

2. Expertisecpa sells investments

Most of the CPAs I know are smart people and they are trustworthy. They have a great deal of expertise – in their professional area. But they typically don’t have the experience or knowledge they need when it comes to helping you buy investments. How could they? They’ve been spending all their time keeping up-to-date with tax code changes during their professional life.

Just because somebody is smart and trustworthy doesn’t mean they are capable in areas outside their main profession. Bankers are usually trustworthy but they are also the last people you should speak with about investments.

You might have a brilliant doctor but would you ask her for tax or financial advice? What is the basis for thinking she is an expert in this unrelated area? You should apply this same logic to the decision you make about where to get investment advice.

3. Bias

CPAs are very conservative people generally speaking. They focus on the short-term downsides because that is how they’ve been trained to think.

That may feel right to you now – but it doesn’t mean it’s the right investment approach for you over the long-term. Don’t get me wrong. Being conservative make sense when it comes to taxes but it doesn’t always work when it comes to investing. Sometimes you have to accept uncertainty over the short-run in order to have a better chance of reaching your long-term goals. Even if your CPA understands this, he or she may be hesitant to encourage you to take the short-term risks you must take.

Is it ever OK to work with a CPA on your investments?

Absolutely. Some of the very best financial planners out there are CPAs. But these are people who have either stopped doing tax work and focus entirely on financial planning or they have teamed up with full time advisors.

Being a financial planner is a full-time job as I said. It is very difficult to be excellent in both investments and taxes. No one person can do both well. Yet you deserve to have excellent service in both aspects of your financial life. The best way to insure that you do get excellent service providers is to make sure your tax preparer and financial advisor are two different people.

The advice I’m giving you is very self-serving – I admit it. But that doesn’t mean that its wrong. Over the years I have observed that CPAs who provide investment advice are doing their clients a disservice. Do you disagree?


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{ 2 comments… read them below or add one }

Lance@MoneyLife&More May 9, 2012 at 11:04 AM

If you are referring to a sole practioner CPA firm then I totally agree with you. They wouldn’t have enough hours in the day to keep up. However, some firms have a tax department and an investment advisory departments that each focus solely on their practice area. If that is the case I think it would be OK to use the same firm (but not the exact individual) .


Neal Frankle May 9, 2012 at 11:50 AM

A good point. I agree it MIGHT be OK. But I would still be skeptical only because of the mindset. I do respect your thoughtful comment.


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