For most people, preparing for retirement requires coordinating with experts. However, not everyone can afford to hire a financial planner.
That’s why some have observed a growing trend: clients turning to their accountants for retirement planning advice.
To some degree, accountants have always been involved in helping their clients prepare for retirement. Specifically, accountants may discuss saving for retirement in terms of how it applies to tax savings.
That said, it appears that many (particularly younger people) are now having more in-depth conversations about retirement planning with their accountants. Now, many accountants are preparing returns suggesting that clients meet with them to talk about such issues as the fact that their tax rate is unlikely to decrease when they retire. Accountants are increasingly working with clients to determine how much they’re actually spending, recommending that they save more to ensure they’re prepared to retire comfortably.
There are several reasons young people are turning to accountants for retirement planning advice instead of working with financial advisors. Again, this trend is partially due to the fact that most people simply can’t afford a financial advisor’s services.
That said, there may be another element at play: advisors no longer prefer to work with low net worth clients.
Typically, a financial advisor’s annual fee is a percentage of the total assets a client has with a firm. At firms where that percentage is relatively low, advisors have begun to stop paying brokers who bring in low net worth accounts. Theoretically, a firm where an advisor’s fee is low would naturally be the one most affordable to those in the middle class, but access to advisors at these firms is becoming increasingly scarce for all except the top earners.
The emergence of alternatives to traditional financial advising services may also play a role in this trend. As AI tech is becoming increasingly innovative, “robo-advisors” are growing better-equipped to provide users with general financial advice. Surveys indicate that Millennials are also interested in using these tools. By complementing robo-advisors with the advice they can receive from their accountants, they may feel they can do without costlier financial advisors.
It’s unclear yet whether this trend will have a significant impact on the availability of clients for traditional financial advising firms. However, it’s worth noting that the trend has implications not only for how financial advisors will approach their work, but also for the way future accountants may serve their clients.
For example, a young person preparing for a career as an accountant right now should take the basic steps, such as familiarizing themselves with the tax code, earning their degree, and potentially supplementing their education with books or online courses when studying for the CPA exam.
They should also focus on cultivating skills and knowledge that will help them offer retirement planning advice to future clients. Such skills may become increasingly valued at accounting firms. Thus, students who prioritize developing them can boost their employability as a result.
None of this is meant to suggest that financial advisors won’t have jobs in the future. They just may need to expect that their clients will continue to be high net worth. Accountants may soon become the standard financial advisors for everyone else.
